Novartis - Climate Change 2019€¦ · This strategy sets ambitious new climate change targets for our business. These are to use only renewable energy (scope 1 and 2) before the

Novartis - Climate Change 2019

C0. Introduction

C0.1

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(C0.1) Give a general description and introduction to your organization.

Novartis is a global healthcare company based in Basel, Switzerland, with a history going back more than 150 years. We providehealthcare solutions that address the evolving needs of patients and societies worldwide. Novartis products are sold in about 155countries and they reached more than 800 million people globally in 2018. Approximately 125,000 people of 147 nationalities work atNovartis around the world (this figure is as of December 31, 2018, prior to our 2019 spin-off of our former Alcon Division). Rapidlyaging populations and the growth in chronic illnesses such as heart disease and cancer continue to increase demand for care and putpressure on health systems around the world. These trends raise the importance of delivering true innovation that produces betterhealth outcomes for patients and society – and doing this more efficiently.

Our purpose is to reimagine medicine to improve and extend people's lives. Our vision is to be a trusted leader in changing thepractice of medicine. Our strategy is to build a leading, focused medicines company powered by advanced therapy platforms anddata science. As we implement our strategy we have five priorities to shape our future and to help us continue to create value for ourcompany, our shareholders and society: unleash the power of our people, deliver transformative innovation, embrace operationalexcellence, go big on data and digital and build trust with society.

In building trust with society we aim to hold ourselves to the highest ethical standards, be part of the solution on pricing and access tomedicines, tackle complex global health challenges and do our part as a responsible global citizen. With respect to the environmentwe established a new company wide environmental sustainability strategy, with the aspiration to become carbon neutral by 2025 andplastic and water neutral by 2030. In addition to Novartis using only renewable energy (carbon neutral own operations) scope 1 and2, the strategy set a target to reduce our overall carbon footprint (scope 1, 2 and 3) by half by 2030 therefore including businesstravel, employee commuting, and use of our products. This will be achieved by meeting our approved Science Based Target of a 35%reduction in absolute emissions across our value chain and additional use of credible, transparent carbon sequestration projects(offsets) through natural climate solutions including forestry projects owned by Novartis.

Research and development is at the core of our company, with 23,000 scientists, physicians and business professionals worldwidefocused on discovering new treatments and developing them for patients. The Novartis Institutes for BioMedical Research (NIBR) isthe innovation engine of Novartis collaborating across scientific and organizational boundaries, with a focus on powerful newtechnologies that have the potential to help produce therapeutic breakthroughs for patients. Global Drug Development (GDD)oversees all drug development activities for our Innovative Medicines Division and the biosimilars portfolio of our Sandoz Division.

Our Innovative Medicines Division researches, develops, manufactures, distributes and sells patented prescription medicines toenhance health outcomes for patients and healthcare providers. Innovative Medicines is organized into two global business units:Novartis Oncology and Novartis Pharmaceuticals. Sandoz develops, manufactures, distributes and sells prescription medicines aswell as pharmaceutical active substances that are not protected by valid and enforceable third-party patients.

Novartis Technical Operations (NTO) manages our manufacturing operations and supply chain across our Innovative Medicines andSandoz Divisions, with a goal of further improving efficiency. Novartis Business Services (NBS), our shared services organisation,delivers integrated solutions to all Novartis divisions and units worldwide. NBS seeks to drive efficiency and effectiveness acrossNovartis by simplifying and standardizing services across six service domains: people & organization (formally HR), real estate andfacility services, procurement, information technology, commercial and medical support activities, and financial reporting andaccounting operations. NBS works to leverage the full scale of Novartis to create value across the Company and to free up resourcesto invest in innovation and product pipeline.

Our Global Health and Corporate Responsibility (GH & CR) strategy fundamentally supports this company purpose and vision, with afocus on expanding access to healthcare and doing business responsibly which includes striving for environmental sustainability. Wetake our responsibility for environmental impacts seriously, and we plan to continue to do what we can to reduce or mitigate ourenvironmental impacts through our ambitious new environmental sustainability targets and our newly approved Science BasedTargets for carbon reduction.

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C0.2

(C0.2) State the start and end date of the year for which you are reporting data.

Start date End date Indicate if you are providing emissions data for pastreporting years

Select the number of past reporting years you will be providingemissions data for

Row1

January 12018

December 312018

No <Not Applicable>

C0.3

(C0.3) Select the countries/regions for which you will be supplying data.AustriaBelgiumChinaEgyptFranceGermanyIndiaIndonesiaIrelandItalyJapanMalaysiaPolandRussian FederationSingaporeSloveniaSouth AfricaSpainSwitzerlandTurkeyUnited Kingdom of Great Britain and Northern IrelandUnited States of America

C0.4

(C0.4) Select the currency used for all financial information disclosed throughout your response.USD

C0.5

(C0.5) Select the option that describes the reporting boundary for which climate-related impacts on your business are beingreported. Note that this option should align with your consolidation approach to your Scope 1 and Scope 2 greenhouse gasinventory.Operational control

C1. Governance

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C1.1

(C1.1) Is there board-level oversight of climate-related issues within your organization?Yes

C1.1a

(C1.1a) Identify the position(s) (do not include any names) of the individual(s) on the board with responsibility for climate-related issues.

Position ofindividual(s)

Please explain

Board Chair The Board of Directors is led by the Chairman of the Board and is responsible for setting the strategic direction of the Novartis Group. The Boardtypically meets 12 times per year and each meeting lasts 6 hours. Climate change is a priority topic for the organization which is balanced with otherbusiness issues and priorities. The Chairman of the Board is responsible for ensuring all material issues are managed effectively by the company. In2017 the Chairman of the Board requested that we revisit our environmental strategy to see if more ambition was possible. At the instruction of theCEO a review was completed under the direction of the Head of Novartis Business Services and a new strategy was approved by the CEO and theBoard in 2018. This strategy sets ambitious new climate change targets for our business. These are to use only renewable energy (scope 1 and 2)before the end of 2025 and to reduce our Scope 1, 2 and 3 footprint by half from a 2016 baseline before the end of 2030.

ChiefExecutiveOfficer(CEO)

The Executive Committee of Novartis (ECN) led by the CEO meets each month. The ECN formally approves our environmental strategy and targets.It also reviews and approves annual budgets and sets business priorities. It oversees and approves major capital expenditures, acquisitions anddivestitures. The ECN also tracks progress against goals and targets for addressing climate related issues. Performance is assured by independentauditors and is reported annually in our Novartis in society report (formally Corporate Responsibility report). The CEO works to ensure that Novartis’climate strategy is balanced with other business priorities and that sufficient resources are in place. The CEO can also take action to accelerateimplementation as needed to respond to external expectations or business needs.

Board-levelcommittee

The Governance, Nomination and Corporate Responsibilities Committee (GN&CRC) oversees the company’s strategy and governance on corporateresponsibility which includes climate related issues. This group typically meets 3/4 times per year and each meeting lasts 2 hours. The RiskCommittee oversees the company’s risks across a wide range of possible topics including climate related physical and transition risks. This task issubject to final Board approval at the GN&CRC. The Chief Ethics, Risk and Compliance Officer is responsible for identifying and elevating issuesgenerated by an integrated enterprise level risk review process. These committees are responsible for identifying and investigating issues which areof strategic importance to the business and checking if they are appropriately managed. If either had concerns about the Novartis climate strategythese would be brought to the attention of the Board and the Executive Committee of Novartis (ECN).

C1.1b

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(C1.1b) Provide further details on the board’s oversight of climate-related issues.

Frequencywith whichclimate-relatedissues are ascheduledagenda item

Governancemechanismsinto whichclimate-relatedissues areintegrated

Please explain

Scheduled –somemeetings

Reviewing andguiding strategyReviewing andguiding majorplans of actionReviewing andguiding riskmanagementpoliciesMonitoringimplementationand performanceof objectivesMonitoring andoverseeingprogress againstgoals and targetsfor addressingclimate-relatedissues

The Governance, Nomination and Corporate Responsibilities Committee typically meets three/four times per year. Climatechange strategy is discussed periodically and any recommendations are subject to Board approval. In 2018 the Board approvedthe new corporate environmental sustainability strategy. The Executive Committee of Novartis, which includes the CEO andother C suite leaders, meets monthly. Environmental sustainability strategy progress is monitored routinely, to include progresstowards carbon neutrality. In 2018 climate strategy, investments in renewable energy (power purchase agreements) and climateresilience were included as agenda items.

C1.2

(C1.2) Provide the highest management-level position(s) or committee(s) with responsibility for climate-related issues.

Name of the position(s) and/or committee(s) Responsibility Frequency of reporting to the board onclimate-related issues

Chief Executive Officer (CEO) Both assessing and managing climate-relatedrisks and opportunities

Quarterly

Other C-Suite Officer, please specify (Global Head of NovartisTechnical Ops)

Both assessing and managing climate-relatedrisks and opportunities

As important matters arise

Other C-Suite Officer, please specify (Head of NovartisBusiness Services)



Other, please specify (Environmental SustainabilityImplementation Steering Committee)



Other C-Suite Officer, please specify (Chief Ethics, Risk andCompliance Officer)


Quarterly

Other committee, please specify (ESG Committee) Both assessing and managing climate-relatedrisks and opportunities

Quarterly

Other committee, please specify (HSE Governance Board) Both assessing and managing climate-relatedrisks and opportunities


C1.2a

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(C1.2a) Describe where in the organizational structure this/these position(s) and/or committees lie, what their associatedresponsibilities are, and how climate-related issues are monitored (do not include the names of individuals).

The CEO chairs the Executive Committee of Novartis (ECN). The Board is establishing and maintaining good governance practicesand issuing board level company policies. The ECN is responsible for overseeing the daily implementation of Board policies whichincludes climate related issues. The members of the ECN are the CEO of Novartis, Chief People and Organization Officer of Novartis,Chief Ethics, Risk & Compliance Officer of Novartis, Chief Financial Officer of Novartis, President of Novartis Oncology, Chief DigitalOfficer of Novartis, President of Novartis Institutes for BioMedical Research (NIBR), the President of Novartis Pharmaceuticals, GroupGeneral Counsel of Novartis, Head of Novartis Technical Operations (NTO), Head of Global Drug Development, Chief Medical Officerfor Novartis, CEO of Sandoz and Head of Novartis Business Services (NBS).

The CEO chairs the Environment, Social and Governance (ESG) Committee. The ESG Committee is the sub-committee of the ECNwith oversight of the Novartis Trust and Reputation strategy. The Committee meets on a quarterly basis to assess progress on keyaction points as part of a quarterly ESG scorecard submission process, and then updates the wider Executive Committee and theBoard on progress and challenges. Permanent members of the committee include the CEO, Group General Counsel, Head ofNovartis Business Services, Chief Ethics, Risk and Compliance Officer, President of the Pharmaceuticals or Oncology Business Units(alternates each year) and permanent guests include the Group Head of Global Health and Corporate Responsibility (GH&CR), Headof Investor Relations, Head of Strategy, Head of Group Internal Audit and Head of Communications.

The Chief Ethics, Risk and Compliance Officer reports directly to the CEO, is a member of the ECN and is responsible for EnterpriseRisk Management across Novartis. He reports quarterly to the risk committee of the Board about relevant risks and issues includingclimate related physical and transition risks as appropriate.

The Health, Safety and Environment (HSE) Governance Board is responsible for ensuring all HSE risks and issues including climateare managed appropriately. ECN members (The Head of NTO, the Chief People & Organization Officer and the Head of NBS) arestanding members of the HSE Governance Board meetings. These roles were selected because the Heads of NTO and NBS haveoperational responsibility for 100% of our scope 1 and 2 carbon emissions and more than 50% of our scope 3 carbon footprint; theChief People & Organization Officer has a key role in ensuring that environmental sustainability and climate change considerationsare considered as part of routine business decisions because this is part of our culture. The HSE Governance Board also includesthe Global Head of Health & Corporate Responsibility for Novartis, the Head of Real Estate and Facilities Services, the Global Headof HSE, and the Global Environment Head. The Global Environment Head is responsible for identifying climate related risks andissues, making recommendations for how they should be managed, developing metrics so progress against targets can be monitored,and seeking endorsement for implementation from the HSE Governance Board.

Novartis does not have a traditional COO but a Head of Novartis Business Services (NBS). The role reports directly to the CEO, is amember of the ECN and ensures the company has effective operational and financial procedures in place. NBS drives efficiency andeffectiveness across Novartis by simplifying and standardizing services across HR, Real Estate & Facility Services, Procurement, IT,commercial and medical support activities and Finance. This person is also responsible for the design of the corporate environmentalsustainability strategy, the management of environmental risks and for achievement of the associated environmental targets andgoals, including climate. Execution of the strategy is spread across the business, with resources and programs in various portions ofthe company. Progress is monitored by the Environmental Sustainability Strategy Implementation Steering Committee which meets atleast quarterly. The Head of NBS updates the CEO at the ESG Committee.

The Environmental Sustainability Strategy Implementation Steering Committee was created to convene at least quarterly to trackprogress on environmental strategy and resolve issues and barriers in execution of the strategy. Members include the Head NTO, Head NBS (ECN Members), Group Head of Communications & Advocacy, Group Head of Global Health & Corporate Responsibility,Head of Technical Research & Development (TRD), Chief Procurement Officer, Head Group Business Planning & Analysis (BPA) ＆Treasury and the Group Head of Real Estate and Facility Services (REFS).

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C1.3

(C1.3) Do you provide incentives for the management of climate-related issues, including the attainment of targets?Yes

C1.3a

(C1.3a) Provide further details on the incentives provided for the management of climate-related issues (do not include thenames of individuals).

Who is entitled to benefit from these incentives?Corporate executive team

Types of incentivesMonetary reward

Activity incentivizedEmissions reduction target

CommentMembers of the Executive Committee Novartis (ECN) are rewarded for meeting division specific absolute emission reductiontargets on total scope 1, scope 2 and scope 3 greenhouse gas (GHG) in tons CO2e in support of our environmental sustainabilitystrategy which are to be carbon neutral own operations (scope 1 and 2) before the end of 2025 and to reduce our overall carbonfootprint (scope 1, 2 and 3) before the end of 2030 from a 2016 baseline.



Activity incentivizedEnergy reduction target

CommentThe Head of Novartis Business Services (NBS) is rewarded for the corporate absolute emission reduction targets on total Scope 1and Scope 2 GHG (in tons CO2e), CO2 emissions from vehicles fleet (in tons CO2) energy efficiency and energy savings targets(savings from energy projects in USD, GJ and tCO2e). The Head of NBS is also rewarded for ensuring the achievement of our2030 climate target which is to reduce our overall carbon footprint (scope 1, 2 and 3) by half by 2030. Targets also include otherenvironmental, HSE and sustainability targets.




CommentThe Head of Novartis Technical Operations (NTO) is rewarded for the corporate absolute emission reduction targets on total Scope1 and Scope 2 GHG (in tons CO2e), energy efficiency and energy savings targets (savings from energy projects in USD, GJ andtCO2e). The Head of NTO is also rewarded for ensuring the achievement of our 2030 climate target which is to reduce our overallcarbon footprint (scope 1, 2 and 3) by half by 2030. Targets also include other environmental, HSE and sustainability targets.

Who is entitled to benefit from these incentives?Other, please specify (REFS Region/Country/Site Managers)


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CommentReal Estate and Facilities Services (REFS) and Novartis Technical Operations (NTO) Region/Country/Site Managers are rewardedfor meeting group or division specific absolute emission reduction targets on total Scope 1 and Scope 2 GHG (in tons CO2e), CO2emissions from vehicles fleet (in tons CO2) and energy savings targets (savings from energy projects in USD, GJ and tCO2e). Ona group level, targets also include emission reduction and energy efficiency projects, as well as behaviour change related projectsand related indicators.

Who is entitled to benefit from these incentives?Other, please specify (Country managers)



CommentCountry managers are rewarded for reducing CO2 emissions from the vehicles fleet and for energy efficiency of their commercialbuildings.

Who is entitled to benefit from these incentives?All employees

Types of incentivesRecognition (non-monetary)


CommentAll associates are eligible to be nominated for awards through REFS, HSE and GH&CR to recognize significant contributions to thecompany goals in reducing carbon footprint through efficiency and behaviours, or other sustainability projects such as waterfootprint, sustainable packaging and waste reductions. The 2018 Better World Awards recognized individuals and teams in sixdifferent categories and one award for outstanding individual achievement. Associates and teams could be nominated on projects,best practices or behaviors anywhere. Once nominations were submitted, a panel of expert judges reviewed and selected thewinners. The 2018 award for Environmental Sustainability was presented to an associate who had been instrumental in GreenTeam activities in the past and helped create the One Novartis Environmental Sustainability Team for global engagement andsharing of best practices to reduce use of energy and reduce our carbon footprint while also supporting our other environmentalgoals related to waste and water.

Who is entitled to benefit from these incentives?Chief Procurement Officer (CPO)



CommentThe Chief Procurement Officer reports to the Head of NBS. The CPO is rewarded for the corporate absolute emission reductiontargets on total Scope 1 and Scope 2 GHG (in tons CO2e) through energy supply projects (proportion of energy supplied fromrenewable sources). The CPO is also rewarded for ensuring the achievement of our 2030 climate target which is to reduce ouroverall carbon footprint (scope 1, 2 and 3) by half by 2030.

C2. Risks and opportunities

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C2.1

(C2.1) Describe what your organization considers to be short-, medium- and long-term horizons.

From(years)

To(years)

Comment

Short-term

0 2 Short-term horizons include previous goals as well as progress beyond those goals as applicable.

Medium-term

3 7 Medium-term horizon includes goals that are actionable and within programming and planning timeframes. There is a heavy focus onincreasing the use of renewables and maximizing efficiency for own operations during the medium-horizon.

Long-term

8 Continuing to improve company performance is a focus for the long-term horizon, as is expanding efforts within the supply chain toimprove Scope 3 performance by partnering with suppliers.

C2.2

(C2.2) Select the option that best describes how your organization's processes for identifying, assessing, and managingclimate-related issues are integrated into your overall risk management.Integrated into multi-disciplinary company-wide risk identification, assessment, and management processes

C2.2a

(C2.2a) Select the options that best describe your organization's frequency and time horizon for identifying and assessingclimate-related risks.

Frequencyofmonitoring

How far intothe futureare risksconsidered?

Comment

Row1

Six-monthlyor morefrequently

>6 years The Head of Climate continuously reviews climate risk models and updates annually. Global level risk assessments arecompleted and shared with appropriate senior leadership across the company where applicable to help inform where moredetailed risk assessments might be required to be generated initially or updated based on a perceived change in risk. Physicalclimate risk categories are generally flooding due to heavy precipitation, sea level rise, water scarcity and heat events. Climatetransition risks include carbon pricing and carbon taxes. Those risks could apply to specific company sites or to broader regionalsupply chains.

C2.2b

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(C2.2b) Provide further details on your organization’s process(es) for identifying and assessing climate-related risks.

At Novartis, risk and strategy processes are integrated in a cross-functional risk management approach, because both belongtogether. A holistic view of Novartis risks is consolidated in a Novartis Risk Compass and enables senior management, ExecutiveCommittee of Novartis and the Novartis Board of Directors to focus discussions on key strategic risks and align the company strategyand our risk exposure. The functions included are Corporate Finance, People & Organization, Business Continuity Management(BCM) & Novartis Emergency Management (NEM), Integrity & Compliance, HSE (Health, Safety, Environment), Information Security,Data Privacy, Quality Assurance and Third Party Risk Management (TPRM), thus including strategical direction, direct operations aswell supply chain. This allows a holistic approach to determine our risk exposure followed by defining the scope of risk managementactivities, understanding the external and internal context in which Novartis operates, defining criteria of the potential impact of eachrisk and the likelihood that each risk will occur. The updated enterprise risk management (ERM) process includes a Risk Identificationtop down from all business units of Novartis as well as the supporting functions that is known as the One Risk Discussion. In addition,the Risk Identification is bottom up from the countries. All these outputs are then consolidated into the Risk Compass of Novartis,which is continually monitored by the Risk & Resilience team. This process is repeated annually.

A risk matrix, where the likelihood of a risk occurring is plotted against the impact on objectives if it does occur, gives guidance forprioritization. The matrix consists of four levels for the likelihood and four levels for impact: low, medium, high and very high. NovartisRisk Compass is composed also of four categories: strategic, operational, emerging & awareness risks which enables us to focus onthe right risk with the right level of mitigation activities. All functions within the company define their threshold of substantive impact.E.g. the financial ranges to define substantive impact at the overall company level are <1%, 1-2%, >2-4% and >4% loss of annualsales. Other measures are time of a delayed product registration, findings in authority inspections, increased resilience, damage ofreputation and or environment. Plotting the impact against the likelihood that this substantive impact will materialize in a 5 year timehorizon, puts the different risks in different positions on a risk matrix and thus guides the senior management, Executive committee ofNovartis and Novartis Board of Directors to focus on the key risks.

Novartis conducted both sensitivity and stress testing for climate and water through 2018 at the global level and piloted an in depthrisk assessment methodology for the NIBR campus in Cambridge, MA. In partnership with the Massachusetts Institute of Technology(MIT) Joint Program on the Science and Policy of Global Change, Novartis conducted the first of a multi-phase project for long-termclimate risk analysis starting with 67 key global sites across the US, Europe and Asia. An initial review is underway of more specificwater risks in several river basins globally (Europe, Africa and Asia) that are significant to Novartis.

MIT Joint Program uses an Integrated Global System Model (IGSM) which is a flexible model that joins detailed models of the earth’sclimate system and the human driven economic system through combined use of the MIT Earth System Model (MESM) and the MITEconomic Projection and Policy Analysis (EPPA) model. The flood modelling uses sensitivity analysis to examine a changing set ofinputs related to 24 hour precipitation data and combined impact of sea level rise and storm surge. The flood risk assessment is astress test using multiple Monte Carlo simulations through a set of various transfer functions. The output of this model is aligned witha tailored Climate Change Vulnerability Index (CCVI) co-created by MIT Joint Program and Novartis, and is deployed in multipleMonte Carlo simulations globally to bound both probability and uncertainty of climate outcomes. This entire collaboration betweenNovartis and MIT Joint Program is a first of kind partnership for MIT with a commercial and industrial partner to design a credible,repeatable climate risk methodology for global operations. Once more granular climate data is derived, it is then combined with otherrisks and opportunities to form an impact valuation. Initial research at several sites shows that individual climate events may notqualify as substantive events financially, however site and regional data will be aggregated as developed over time to construct aglobal view of financial impact. Due to the effort involved, a full global financial analysis is not yet complete . Efforts to do so began in2017 and have continued through 2018.

C2.2c

(C2.2c) Which of the following risk types are considered in your organization's climate-related risk assessments?

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Relevance&inclusion

Please explain

Currentregulation

Relevant,alwaysincluded

Current regulations are always considered from a risk and opportunity perspective. Novartis operates globally, and has significantfinancial exposure to developing carbon pricing mechanisms. 42 national systems exist, and Novartis has operations in 17 of thosenations as well as across the EU where an ETS is already in place. The rapid price increase associated with the EU ETS is an exampleof the increasing financial risk potentially posed by the carbon footprint from Novartis production facilities and supply chain located in theEU. Slovenia, for instance, is one country where we have significant exposed operations. In the last 12 months, the cost of allowances inthe EU ETS has increased from just under €4 to just under €14. Multiple institutions expect the EU ETS costs to increase to between€40-€80 by 2021 and between €50-€100 by 2030. Methods to manage this risk: Novartis is pursuing rapid shifts in procurement ofrenewable energy that should complement ongoing efficiency projects that will drive demand reduction. These efforts in efficiency,adoption of renewables and offsets will be applied to reduce our current and emerging exposure to risk in this area. Previous CDPreporting has shown that the pharma sector has a consistent view that this is a sector risk. Carbon pricing is a transition risk that isincluded in risk discussions because of its financial impact. The relative position in the risk matrix varies by location and by year.

Emergingregulation


Emerging regulations are always considered from a risk and opportunity perspective. Novartis operates globally, and has significantfinancial exposure to developing carbon pricing mechanisms. 42 national systems exist, and Novartis has operations in 17 of thosenations as well as across the EU where an ETS is already in place. The rapid price increase in the EU ETS is an example of theincreasing potential financial risk posed by our carbon footprint from the Novartis production facilities and supply chain located in the EU.Slovenia, for instance, is one country where we have significant exposed operations. In the last 12 months, the cost of allowances in theEU ETS has increased from just under €4 to just under €14. Multiple institutions expect the costs within the EU ETS to increase tobetween €40-€80 by 2021 and between €50-€100 by 2030. Methods to manage this risk: Novartis is pursuing rapid shifts in procurementof renewable energy that will complement ongoing efficiency projects that will drive demand reduction. These efforts in efficiency,adoption of renewables and offsets will be applied to reduce our current and emerging exposure to risk in this area. Previous CDPreporting by various companies in the Pharma sector have shown consistently that this is a sector risk. Because of the direct impact todirect operations and the supply chain from flooding, severe weather events, water scarcity and heat events that can disruptmanufacturing. Carbon pricing and Climate related financial disclosures are transition risks that are included in risk discussions becauseof their potential financial impact. The relative position in the risk matrix varies by location and by year.

Technology Relevant,sometimesincluded

Emerging technology for production techniques may introduce more stress in an area impacted by climate change, possibly resulting in acapacity constraint and a risk to the business, so Novartis considers consumption requirements in terms of the supply chain and systemof systems. Water intensive production processes in an area impacted by water scarcity are a perfect example. Novartis production inIndia is an example of a location that may be impacted, but Novartis may face similar risks in other parts of Asia and in Europe.

Legal Relevant,alwaysincluded

In many cases, there are legal requirements to be met regarding carbon emissions trading schemes or other emissions. Regulatory risksare always included as part of the risk identification process. These risks are reviewed at least annually. Increasingly more focus is givento evolving legal risks that might occur related to the financial disclosure of climate related financial risks. Formal financial disclosures canimpact investor decisions and as such should meet rigorous standards for data integrity and review before being included as part ofmainstream financial reporting. Failure to do so potentially represents a risk to the company. The Task Force on Climate-relatedFinancial Disclosures (TCFD) is a specific example that applies to Novartis in this area. In recent years CDP reporting has shown thatmajor pharmaceutical companies including Novartis view this as a sector risk. This risk is not limited to any single region that Novartisoperates in, although changes are most likely to happen in the EU because this is already being discussed by some governments in theregion.

Market Relevant,sometimesincluded

Within the pharmaceutical sector clinical needs determine which products are ultimately used. However, where patient outcomes areequivalent more companies such as Kaiser Permanente are giving preference to products that have a lower carbon footprint. It istherefore critical that Novartis includes market considerations as part of its risk assessment process. Market risks driven by interruption tosupply chains are also considered. This has happened in the past due to climate and carbon related issues in multiple markets. Forexample some suppliers to Novartis that are located in China have been required to shut down because of concerns about poor airquality related to the consumption of energy and the associated emissions, including impacting the Pharma sector supply chain. Inaddition severe weather conditions in Houston impacted an Alcon facility, however, business continuity plans limited the impact. PreviousCDP reporting and discussions with peer companies has shown that the pharma sector has a consistent view that this is a sector risk.Market considerations are included in risk discussions because of their financial impact. The relative position in the risk matrix varies bylocation and by year.

Reputation Relevant,alwaysincluded

Risks related to reputation are always considered. Novartis continues the work of a Third Party Risk Management work stream tomanage conduct of suppliers, as well as focusing on reputational risk and opportunity related to climate. New norms in the market requiretransparency as well as performance. Lack of transparency also represents a reputational risk. Reputation on environmentalsustainability can also have both negative and positive impact on talent management. Supplier audits from the Nordic countries andKaiser Permanente's decision in the US to decarbonize their supply chain are early examples of specific actions that require sustainedperformance to maintain a reputation that allows for access to these markets. Previous CDP reporting and conversation with peercompanies has shown that the pharma sector has a consistent view that this is a sector risk. There is no regional limitation on this risk.

Acutephysical


Sudden physical impact of climate change is always included in the consideration of risks most notably in relation to the impact offlooding, severe weather events, heat events and water scarcity. Acute physical risks include flooding from sea level rise, flooding fromheavy precipitation events, water scarcity, heat events and changing storm patterns. In the last year, Novartis facilities and associates inthe US have been impacted by flooding from severe weather events in the Southern portion of the US. Previous CDP reporting byvarious companies in the pharmaceuticals sector have demonstrated that this is a sector risk because of its direct impact on operationsand the supply chain. Novartis has operations in the US, Europe and Asia that may experience these impacts more than some otherregions.

Chronicphysical


Chronic physical events such as persistent flooding that disrupts transportation and logistics networks needed to support normalbusiness are considered, as are emerging trends in regional heat profiles that may overwhelm installed cooling capacity. Novartisoperations in Jakarta (Indonesia) and Cambridge (US) are two examples of regional locations that may face chronic physical impact inthe future. These impacts may prevent our associates from reaching their place of work and our buildings because of damage toinfrastructure (e.g., utilities located in basements). Our work with Massachusetts Institute of Technology (MIT) in particular has highlightedimpacts to our Cambridge Campus over the next 40 years which we are taking action to mitigate.

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Upstream Relevant,sometimesincluded

Climate stress on interdependent systems may impact grid resilience and bio diversity, so these are topics that are consideredconsistently but not addressed every single year. Emerging discussions during this reporting year are likely to lead to more frequent andholistic considerations of these risks to availability of raw materials. Other upstream risks that specifically had focus during 2018 are therisks possibly posed to the business by increasing carbon pricing schemes. 80% of Novartis carbon footprint is in Scope 3 emissions,which means that the company potentially has a large risk exposure that could vary based on energy intensity and physical location ofkey suppliers. Since Novartis has several hundred thousand suppliers in the entire network, focusing on firms with the most impact willbe critical. This has sometimes been included in the past, and is likely to be always included in the future as more data becomesavailable to quantify scope of risk. Wildfires in California that have been made worse by ideal conditions created by heat events andwater scarcity related to climate change have resulted in brown outs and black outs in portions of Northern and Southern California thatdirectly impacted businesses that support Novartis sites. Previous CDP reporting and conversations with peer companies has shown thatthe pharma sector believes supply chain disruption may have a sector impact.

Downstream Relevant,sometimesincluded

Climate impact on socio-economic systems can disrupt physical distribution supply chains, and also result in regional insecurity andinstability that might make it difficult to deliver medicine to patients, so this is considered consistently but not addressed in every singleyear. Emerging discussions during this reporting year are likely to lead to more frequent and holistic considerations of these risks.Transportation networks in Africa are critical to allow patient access to medicine and healthcare, and studies have shown that severeweather events from climate change are likely to have a catastrophic effect on African roads and transportation networks. This wouldhave a direct impact on a patient population that Novartis serves.

Relevance&inclusion

Please explain

C2.2d

(C2.2d) Describe your process(es) for managing climate-related risks and opportunities.

At Novartis, risk and strategy processes are integrated in a cross-functional risk management approach, because both belongtogether. A holistic view of Novartis risks is consolidated in a Novartis Risk Compass and enables senior management, ExecutiveCommittee of Novartis and the Novartis Board of Directors to focus discussions on key strategic risks and align the company strategyand our risk exposure. The functions included are Corporate Finance, People & Organization, Business Continuity Management &Novartis Emergency Management, Integrity & Compliance, Corporate Legal, HSE (Health, Safety, Environment), InformationSecurity, Data Privacy, Quality Assurance and Third Party Risk Management (TPRM), thus including strategical direction, directoperations as well supply chain. This allows a holistic approach to determine our risk exposure followed by defining the scope of riskmanagement activities, understanding the external and internal context in which Novartis operates, defining criteria of the potentialimpact of each risk and the likelihood that each risk will occur. The updated ERM process includes a Risk Identification top down fromall business units of Novartis as well as the supporting functions that is known as the One Risk Discussion. In addition, the RiskIdentification is bottom up from the countries. All these outputs are then consolidated into the Risk Compass of Novartis, which iscontinually monitored by the Risk & Resilience team. This process is repeated annually, and information like the global climate riskassessment is fed into this process.

A risk matrix, where the likelihood of a risk occurring is plotted against the impact on objectives if it does occur, gives guidance forprioritization. The matrix consists of four levels for the likelihood and four levels for impact: low, medium, high and very high. NovartisRisk Compass is composed also of four categories: strategic, operational, emerging & awareness risks which enables us to focus onthe right risk with the right level of mitigation activities. Plotting the impact against the likelihood that this impact will materialize putsthe risks in different positions on a risk matrix and thus guides senior management, ECN and Novartis Board of Directors to focus onthe key risks.

Normal business continuity planning that anticipated impacts of severe weather events resulted in minimal disruption to operations inthe aftermath of Hurricane Michael, and these basic business continuity activities will have a greater focus in the future informed bycurrent climate risk scenario analysis fed into the One Risk process.

Novartis has taken a proactive approach towards existing and forthcoming legal schemes on greenhouse gas (GHG) emissions asset forth in its corporate environmental sustainability strategy approved in 2018. The new strategy aims to achieve carbon neutralityfor own operations by 2025 through efficiency, use of nothing but renewable energy and credible offsets, and also aims to reduceNovartis' value chain carbon footprint for Scopes 1, 2 and 3 by 50% in 2030. Novartis and their supply chain may also be impacted

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more broadly when prices of carbon will become more fully integrated into prices of goods and services. Novartis operates globally,and has significant potential financial exposure to developing carbon pricing mechanisms. 42 national systems exist, with Novartisoperations in 17 of those nations which includes the EU where an Emissions Trading Scheme (ETS) is already in place.

Information on risk exposure related to carbon pricing as a transition risk has directly impacted the Novartis utilities procurementstrategy and hedging execution. Increased costs in the non-energy costs of electricity have led procurement to rapidly accelerateprocurement of renewable energy in order to contain possible cost increases in the future. Novartis with the support of a third partystarted a full review in 2018 of carbon emissions and existing use of energy attributes to reduce emissions, and the results have beenused to influence energy procurement decisions as well as renewable energy attribute procurement in 2018 and moving forward.This analysis also contributed to the Novartis decision to pursue a Pan-European renewable power purchase agreement to limit thisrisk through reduced emissions.

Information on physical risks to various company sites has been provided to key personnel developing strategy and footprint plans forproduction operations. This information can serve to validate planned strategy or influence developing strategy. Those decisions aremade as a result of many different factors, and climate risk is one data set provided to augment other information used in footprintdeterminations. Each of these examples also represents an opportunity for the company. Sound decisions in both of these areas canlower costs, lead to increased effectiveness and profitability over the short, medium and long term horizons.

C2.3

(C2.3) Have you identified any inherent climate-related risks with the potential to have a substantive financial or strategicimpact on your business?Yes

C2.3a

(C2.3a) Provide details of risks identified with the potential to have a substantive financial or strategic impact on yourbusiness.

IdentifierRisk 1

Where in the value chain does the risk driver occur?Direct operations

Risk typeTransition risk

Primary climate-related risk driverPolicy and legal: Increased pricing of GHG emissions

Type of financial impactIncreased operating costs (e.g., higher compliance costs, increased insurance premiums)

Company- specific descriptionNovartis has taken a proactive approach towards existing and forthcoming legal schemes on greenhouse gas (GHG) emissions asset forth in its Corporate Environmental Sustainability Strategy approved in 2018. The new strategy aims to achieve carbonneutrality for own operations by 2025 through efficiency, use of nothing but electricity and credible offsets, and also aims to reduceNovartis' value chain carbon footprint for Scopes 1, 2 and 3 by 50% in 2030 . Novartis and its supply chain may also be impactedmore broadly when prices of carbon will become more fully integrated into prices of goods and services. Novartis operates globally,and has significant potential financial exposure to developing carbon pricing mechanisms. 42 national systems exist, and Novartishas operations in 17 of those nations as well as across the EU where an ETS is already in place. Specifically Novartis has

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assessed climate related risks associated with its energy procurement strategy. This has resulted in the strategy being revised toput a clear focus on renewable energy supply. Information on risk exposure related to carbon pricing, as a transition risk, hasdirectly affected how Novartis procures energy and hedges against rising costs. Increased costs in the non-energy related chargesfor electricity have led Procurement to rapidly accelerate the procurement of renewable energy to contain possible cost increases inthe future. Novartis, with the support of a third party, has started to review its use of energy attributes to reduce emissions. Thisanalysis contributed to the Novartis decision to pursue a Pan-European renewable power purchase agreement to mitigate futurecosts of carbon.

Time horizonMedium-term

LikelihoodVery likely

Magnitude of impactMedium-low

Are you able to provide a potential financial impact figure?Yes, an estimated range

Potential financial impact figure (currency)<Not Applicable>

Potential financial impact figure – minimum (currency)62000000

Potential financial impact figure – maximum (currency)93000000

Explanation of financial impact figurePreviously, purchased energy costs have exceeded USD 311 million annually. Potential future increases in both energy prices andthe implementation of carbon costs may have a stronger impact of estimated 20-30% of energy cost in the long-term, i.e. USD 62-93 million per year. Estimates are based on the range of expected price increases in trading schemes and proposed carbon taxes.While these are highly variable in projections, the rapid price increase in the EU Emissions Trading Scheme (ETS) is an example ofthe increasing financial risk posed by our carbon footprint. In the last 12 months, the cost of allowances in the EU ETS hasincreased from €15 to €27, driven in part by the introduction of the Market Stability Reserve in 2019 in attempt to reduce theamount of allowances in the market and stimulate the focus on emissions reduction by industry. Multiple institutions expect thecosts within the EU ETS alone to increase to between €40-80 by 2021 and between €50-100 by 2030.

Management methodIncreased costs have led Procurement to rapidly accelerate the procurement of renewable energy. Novartis, with the support of athird party, has started to review its use of energy attributes to reduce emissions. This analysis contributed to the Novartis decisionto pursue a Pan-European renewable power purchase agreement to mitigate future costs of carbon. Novartis has also endorsed aninternal carbon price of USD 100/tCO2e as shadow price, anticipating the increase in real costs of carbon to rise to USD 40-80/tonCO2e by 2025, and to USD 60-100/ton by 2030 as a result of both regulatory and carbon market dynamics. Efforts in efficiency,adoption of renewables and offsets will be applied to reduce potential exposure to carbon pricing as rapidly as possible.Consolidated tracking of trends in non-energy costs as well as possible exposure to pricing schemes based on energy intensity andphysical location are being used by procurement to adjust procurement and hedging strategies to reduce volatility and exposure.Cost of management includes internal annual costs for three associates (part-time) and consultant support.

Cost of management1000000

CommentWhile the costs to manage the existing EU ETS scheme within the company are limited, the expansion of schemes into othermarkets will require additional management focus and efforts. Efforts to align with suppliers will also take time and resources thathave not been determined yet. As EU-ETS moves into Phase IV in 2021, any reduction in free allowances could further increaseannual management costs between USD 0.6 million and USD 2.2 million.

IdentifierRisk 2



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Primary climate-related risk driverPolicy and legal: Enhanced emissions-reporting obligations


Company- specific descriptionIncreasing requirements for transparency and credibility in sustainability reporting are being seen in both regulatory and voluntaryreporting. The number of reports required and requested, the increase in both the number and complexity of questions and thegrowing demand for transparency all drive increased costs to staff and respond as well as to track data in a more granular andverifiable manner. The size of the company and its presence in 110 markets globally mean that this is a larger risk to Novartis thansome smaller companies. Additionally, as a pharmaceutical company, many external parties are routinely focused on emissionsfrom operating sites whether it is carbon or water. All labor efforts to manage increased reporting (compulsory and voluntary)represent an opportunity cost in actions that could be taken to actually reduce emissions through execution of programs, as thosecharged with designing and executing programs are frequently the same staff who would prepare the reports.

Time horizonShort-term

LikelihoodVirtually certain

Magnitude of impactLow





Explanation of financial impact figureIncreased costs for more widespread and rigorous reporting requirements (compulsory and voluntary) will potentially driveincreases in cost of goods sold. This will result from costs in the supply chain in addition to internal costs, but those costs are notwell defined yet. Increased costs of tracking the impact of carbon pricing and then reporting the risks and opportunities drives upresources devoted to tracking data, analyzing data and crafting appropriate responses to government, private sector and non-profitreporting agencies. Additionally, the expectation that these detailed reports are signed off at higher levels in the company expandthe network of staff impacted in drafting and review processes, as well as increasing labor costs as a result of the seniority ofassociates involved. These costs represent opportunity costs for internal labor resources as well as external costs for consultingand technical services to validate and report data. Costs are based on labor rates.

Management methodStandardized responses are being developed to streamline reporting processes, and requirements for carbon reporting have beenwritten into appropriate contracts with staff and companies executing utilities procurement. This has reduced some internalworkload at the site levels, but those savings are likely not enough to offset growing labor and service costs. Cost of management isthe same as the financial impact, and is based on aggregated cost of labor costs across multiple pay grades in addition to externalconsultant fees. This is a conservative figure, and likely understates the true costs. Cost of management includes internal annualcosts for three associates (part-time) and consultant support.


Comment

IdentifierRisk 3



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Primary climate-related risk driverTechnology: Costs to transition to lower emissions technology


Company- specific descriptionIn order to achieve more rapid progress in carbon footprint reductions to align to a science based target, significant investmentsmay be required across the company. While many of these investments should involve normal replacement and updating ofequipment like heating, ventilation and air conditioning to the most efficient current standards as a result of normal life cyclereplacement, other investments may need to be accelerated. Additionally, some planned investments will likely require a higherlevel of performance in efficiency and carbon reduction than previously anticipated. Large quantities of water are used at severalNovartis sites to cool production processes and /or buildings (e.g., the Basel Campus in Switzerland used 13 million m3 in 2018).Novartis encourages the use of water for cooling at sites where water is abundant. This saves significant quantities of energy andassociated greenhouse gases (GHG) emissions. In the unlikely event of a longer-term future when sites could no longer abstractcooling water from the aquatic environment due to e.g. climate change resulting in water shortage, the use of mechanical chillerswould be required to cool the production processes. This would result in significantly higher operating costs (estimated 10-20%)through increased energy usage and significantly higher GHG emissions (estimated 10-20%). The higher costs and higher GHGemissions would be considered a substantive financial risk to the organization. Possible future increases in energy prices and theimplementation of carbon costs may have a stronger impact of estimated 20-30% of the USD 311 million energy cost in the long-term, i.e. a financial impact of USD 62-93 million per year.



Magnitude of impactHigh





Explanation of financial impact figureTotal energy costs were approximately USD 311 million in 2018, and while prices had been previously stable we have seenincreases in the price of energy recently, both in direct costs of production and non-energy costs. Since the introduction of ourenergy program in 2008 we have reduced annual energy costs by USD 76 million through projects compared to a business asusual scenario. Possible future increases in energy prices and the implementation of carbon costs may have a stronger impact ofestimated 20-30% of the USD 311 million energy cost in the long-term, i.e. a financial impact of USD 62-93 million per year.

Management methodPreviously, sites identified and funded projects to reduce energy consumption and carbon footprint. Energy projects over the last 5years had an average payback of 2.6 years. Management costs for the energy management programs at Divisions and sites of app.USD 4-5 million per year were largely over-compensated by the savings of so far USD 71 million p.a. in energy costs achieved bythe program over last 7 years; i.e. no additional costs but rather attractive cost reductions overall. However, many of the futureinvestments will be more expensive and require longer paybacks and more focused capital investment. Accordingly, standards forjudging and approving these capital investments are being refined to allow a more streamlined analysis of sustainability benefitswhen making major capital investments. It is anticipated, though, that these investments will continue to provide a positive netpresent value. Costs to manage were validated in 2018 and include estimates of capital investments needed based on normalizedcosts per technology based on carbon reductions. Those have been extended out through the next 12 years, planning costs havebeen added and a discount rate has been applied. Cost of management is estimated to include labor costs (USD 2 million), capitalcosts and carbon pricing costs across various Novartis offices.


Comment

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IdentifierRisk 4


Risk typePhysical risk

Primary climate-related risk driverChronic: Changes in precipitation patterns and extreme variability in weather patterns


Company- specific descriptionNovartis’ risk related to climate change exists in three areas: water scarcity, flooding from sea level rise and severe weatherevents, and heat events. All of these have the ability to create physical property destruction, interruption to business and impact onour associates and the patient communities that we support. Changes in precipitation patterns, coupled with sea level rise in somelocations, likely represent a growing risk to the company and to its supply chain. Previous patterns of flooding will likely no longer behistorically accurate, which means that engineering estimates for the built environment will be inadequate, both on site and in thesurrounding communities. In the past year alone, Novartis associates in Houston, TX and Cambridge, MA both saw extendeddisruptions in their communities (flooding, power outages, disruption in transportation networks) as a result of unusual storm eventsand patterns. Extended heat events may eventually overwhelm installed cooling capacity, resulting in variations in temperature andhumidity in research and production operations that are unacceptable.

Time horizonLong-term

LikelihoodMore likely than not

Magnitude of impactMedium





Explanation of financial impact figureSites may have to invest in the reinforcement of site infrastructure (larger storm water run-off, specific building protection, greatercooling capacity, etc.), which is estimated at USD 25 to 31 million overall. Additionally, site engineering might use 5-10% moreresources over several years when such flood protection projects must be implemented. These additional engineering costs areassessed to be USD 0.4-0.5 million in total over next 5 years. Detailed risk assessments leveraging outside partners would alsorequire financial resources. Financial estimate of impact is based on the working hypothesis of a possible occurrence of 8 events in12 years having a maximum impact of USD 5 million per event in physical damage and disruption to business. That number isbased on very loose assumptions and will change as more data becomes available in future years through more detailed modellingand risk assessment in collaboration with the Massachusetts Institute of Technology.

Management methodActions related to flood protection are aspects of site engineering and facility management. Risks are assessed in the annual riskevaluation process, where natural disasters are a regular part of and are prepared site by site. To avoid such events, specific riskassessment and consequently necessary protection measures might become necessary. This may lead to higher costs to keepsuch risks within acceptable limits. Initial global risks are being assessed in collaboration with the Massachusetts Institute ofTechnology, and have been shared with applicable production, research and facilities staff. Use of the MIT Global Earth SystemsModel (GESM) should create more accurate information about risks in water scarcity, flooding and heat events. A current campusrisk assessment will serve as the model for subsequent detailed risk assessments globally that involve global, regional and localstaff, to make informed decisions on acceptable level of risk and the physical investments needed. This could be shared as neededwith group level business continuity, risk and strategy staff in a coordinated effort to assess and manage risk globally to our sitesand to our integrated supply chain. The estimated cost (USD 32 million) includes the annual sponsorship fees for the MIT joint

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program, labor costs internal to the company, external consulting fees for detailed risk assessments and the possible costs ofadaptation measures to reduce risk exposure.


Comment

IdentifierRisk 5



Primary climate-related risk driverMarket: Other

Type of financial impactIncreased production costs due to changing input prices (e.g., energy, water) and output requirements (e.g., waste treatement)

Company- specific descriptionCurrently Novartis sells multiple products based on natural compounds. One specific example is Sandostatin which generatesroughly USD 1.6 billion in net sales globally as part of oncology. Disruption of this supply chain due to any reason, including loss ofbiodiversity, could in theory eliminate or dramatically reduce that in a smaller amount or all the way up to USD 1.6 billion in sales.Also, increasing efforts to design biologically based medicines will be impacted by a loss in biodiversity if fewer natural compoundsare available for research, development and production of medicines. Various medicines using natural compounds may havedifferent levels of risk.

Time horizonLong-term

LikelihoodAbout as likely as not

Magnitude of impactMedium-high





Explanation of financial impact figureCurrent Novartis products based on natural compounds include Sandostatin, which generates roughly USD 1.6 billion in net sales.Disruption of this supply chain could dramatically reduce or eliminate that up to the maximum of USD 1.6 billion in sales.Additionally, prices for agricultural commodities may increase by 20-30% over the next 10 years, which could have potential impacton products using natural compounds. This could potentially drive cost of goods sold up in that sector of our business and reducemargins for the portion of our USD 51 billion annual net sales that are dependent on agricultural commodities.

Management methodNovartis has staff that routinely work to enhance supply chain resilience, regardless of the type of potential disruption. Alternativesuppliers and sources are implemented where necessary. Significant overall risks are assessed in the annual risk evaluationprocess, including disruptive events, and are prepared site by site. To avoid such events, specific risk assessment andconsequently necessary protection measures might become necessary. This may lead to higher costs to keep such risks withinacceptable limits. Initial global risks are being assessed in partnership with the Massachusetts Institute of Technology (MIT), andhave been shared with production, research and facilities staff. A pilot program took place in one location this year in order tocreate a framework for replication of climate risk assessments at sites deemed to be at greatest risk. Use of the MIT Global EarthSystems Model (GESM) should create more accurate information about risks in water scarcity, flooding and heat events. A currentsite risk assessment will serve as the model for subsequent detailed risk assessments globally that involve global, regional and

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local staff, to make informed decisions on acceptable level of risk and the physical investments needed. This could be shared withapplicable group level business continuity, risk and strategy staff for coordinated risk management. Management costs includeaggregated labor costs and external consulting support.


Comment

C2.4

(C2.4) Have you identified any climate-related opportunities with the potential to have a substantive financial or strategicimpact on your business?Yes

C2.4a

(C2.4a) Provide details of opportunities identified with the potential to have a substantive financial or strategic impact onyour business.

IdentifierOpp1

Where in the value chain does the opportunity occur?Direct operations

Opportunity typeResource efficiency

Primary climate-related opportunity driverUse of more efficient production and distribution processes

Type of financial impactReduced operating costs (e.g., through efficiency gains and cost reductions)

Company-specific descriptionIn general, Novartis investments have yielded a 2.6 year payback. Applied against a USD 311 million annual spend on energy, thiswould have significant financial benefit to the company. This could lower the cost of goods sold, improving the bottom line andfreeing resources to be spent on research and development efforts for new drugs. Even a 10% improvement each year woulddeliver USD 31 million each year, quickly adding to over USD 100 million in 3-4 years of extra cash flow, providing benefit in theshort to medium horizon. Some of those benefits may be reduced as greater efficiency makes it more difficult to achieve short termsavings and rapid return on investment (ROI), thus projections beyond a medium horizon are not provided.

Time horizonCurrent

LikelihoodVirtually certain

Magnitude of impactMedium-high





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Explanation of financial impact figureReduction in energy use not only reduces expenses, but also results in absolute emissions reductions and reduces the exposure tofuture carbon pricing schemes globally. Previously, purchased energy costs have exceeded USD 311 million annually. Potentialfuture increases in both energy prices and the implementation of carbon costs may have an impact of estimated 20-30% of energycost in the long-term, i.e. USD 62-93 million per year. In the last 12 months, the cost of allowances in the EU ETS has increasedfrom €15 to €27, driven in part by the introduction of the market stability reserve in 2019 in attempt to reduce the amount ofallowances in the market and stimulate the focus on emissions reduction by industry. Many institutions expect the costs within theEU ETS alone to increase to between €40-€80 by 2021 and between €50-€100 by 2030. The combination of USD 62-93 millionannually plus USD 31 million annually comprise the financial benefit through efficiency and avoided emissions.

Strategy to realize opportunityThe internal price of carbon along with carbon footprint reduction goals should drive investments in new technology, upgradedtechnology as part of equipment maintenance and refresh and incentive programs to drive absolute reductions. Costs to implementand the true long term opportunity are still being developed, however, initial estimates suggest that at least USD 33 million will berequired. Examples include investments in energy efficiency at the Shanghai campus that delivered over 20% reductions in energyconsumption.

Cost to realize opportunity33000000

Comment

IdentifierOpp2


Opportunity typeEnergy source

Primary climate-related opportunity driverUse of lower-emission sources of energy

Type of financial impactReduced exposure to future fossil fuel price increases

Company-specific descriptionNovartis is exposed to carbon pricing because it has significant operations in Europe. The emerging options for Power PurchaseAgreements (PPA’s) and expanding renewable generation in Europe mean that Novartis is able to obtain renewable energy for itsown operations and potentially to negotiate PPA’s for key supply chain partners that are co-located in Europe. This will help toreduce its scope 3 emissions. Rapid adoption of renewable energy can result in lower carbon, lower costs and greater businesscontinuity depending on the specifics of the project. In some cases, more than one of those benefits may accrue. Novartis canprioritize projects based on those three general opportunities to improve business results. In markets like China, reducing carbonfootprint may create opportunities as the nation develops carbon pricing schemes. In markets like India, reducing consumption andshifting to renewables can control variability in costs. In all other markets, rising costs of energy, both in production costs and non-energy costs, can be limited by efficiency and investment in renewable generation. Decarbonizing our products may also makethem more attractive to companies like Kaiser Permanente, who have pledged to decarbonize their supply chain.



Magnitude of impactHigh




Potential financial impact figure – maximum (currency)

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93000000

Explanation of financial impact figureReduction in energy use not only reduces expenses, but also results in absolute emissions reductions. That decrease in emissionsalso reduces the exposure to future carbon pricing schemes globally as described in the carbon pricing section of this submission.Previously, energy costs have exceeded USD 311 million annually. Future increases in both energy prices and the implementationof carbon costs may have a stronger impact of estimated 20-30% of energy cost in the long-term, i.e. USD 62-93 million per year.

Strategy to realize opportunityPower purchase agreements for access to renewable energy projects that are on-site and offsite will likely be the primary approach.Some balance sheet financing of onsite renewables may take place in markets that don't support a procurement strategyleveraging PPAs. In an effort to integrate these risks into normal business, Novartis has also endorsed an internal carbon price ofUSD 100/tCO2e as shadow price, anticipating the increase in real costs of carbon to possibly rise to USD 40-80/ton CO2e by2025, and to USD 60-100/ton by 2030 as a result of both regulatory and carbon market dynamics. Novartis is pursuing rapid shiftsin procurement of renewable energy that should complement ongoing efficiency projects that will drive demand reduction. Theseefforts in efficiency, adoption of renewables and offsets will be applied to reduce potential exposure to carbon pricing as rapidly aspossible. Consolidated tracking of trends in non-energy costs as well as exposure to pricing schemes based on energy intensityand physical location are used by procurement to adjust procurement and hedging strategies to reduce volatility and exposure.


CommentCosts in many cases are limited to legal fees for power purchase agreements and isolated cases of balance sheet financing of onsite generation. Cost does not include existing utility bill costs.

IdentifierOpp3


Opportunity typeResilience

Primary climate-related opportunity driverOther

Type of financial impactIncreased reliability of supply chain and ability to operate under various conditions

Company-specific descriptionEfforts to establish climate resilience in our own operations as well as working to establish collaborative climate resilience in ourcommunities may allow Novartis to operate when others are unable to continue. By collaborating with communities, this couldenhance brand value as well as positioning Novartis to capture market share if production of a competitor's comparable medicine isinterrupted as a result of climate issues. Many of our locations are along coasts that are more vulnerable to flooding, as we haveseen in Cambridge, MA in the last year. Additionally, more of our sites are being subjected to extended heat events like Basel.Water scarcity is becoming more of an issue in markets we operate in like India. Emphasis on recognizing and reacting to changesin our locations will be key to enduring stability and profits in those markets, potentially providing resilience that our competitorsmay not develop. Climate change could decrease water availability so taking action to reduce water consumption gives us theopportunity to build a more sustainable business and to continue to meet the needs of our patients. Novartis production ofbiosimilars relies on abundant local water supplies so this represents a risk to the company in water scarce areas. The financialbenefit of decreased water consumptions varies by location. However, in one of our manufacturing sites in Turkey, the waterconsumption was reduced and the quality of effluent was increased by the installation a of a reverse osmosis-ultrafiltration systemwhich allowed a proportion of the water to be reused within the site. The project cost USD 600,000, but the benefit was a waterconsumption reduction by 14% and a cost reduction of USD 100,000 per year.


LikelihoodLikely

Magnitude of impactMedium-low


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Explanation of financial impact figureExploration of financial impact began recently, and is underway. An initial working hypothesis for internal debate is that 8 eventscould occur over a 12 year period, each costing the company a maximum of USD 5 million in physical costs and disruption tobusiness. It is not clear if that figure will prove to be accurate, but work continued in 2018 in partnership with the MassachusettsInstitute of Technology (MIT) to assess possible risks. Costs to realize opportunity are based on costs for risk assessments andlimited physical adaptation. In the meantime we are able to estimate the benefit to the business of reducing its water consumption. Ifwe achieve our 2025 target we will save around 6 million m3. Applying the Novartis internal water costs of 3.66 USD / m3, whichwas determined during the development of our new environmental sustainability strategy and includes the full costs of water, wewere able to estimate potential positive financial impact.

Strategy to realize opportunityConduct global climate risk assessments that will inform more detailed risk assessments. Once damage curves to include businessimpact of interruptions are assessed, that information can be shared with applicable associates working on strategy. Global risksare being assessed in partnership with the Massachusetts Institute of Technology, and can be shared with applicable production,research and facilities staff. Use of the MIT Global Earth Systems Model (GESM) should create more accurate information aboutclimate risks. This can be shared with applicable group level business continuity, risk and strategy staff in a coordinated effort toassess and manage risk globally to our sites and to out integrated supply chain. Details about modelled climate risk that don'tinvolve proprietary data should be shared with the communities where our analysis is taking place. This would allow progress inbuilding resilience across the system of systems that are required to support normal business operations and provide significantreputational benefit as well as practical benefit. To realize the benefits of reduced water consumption we anticipate the need toinvest in capital improvements for production and water processing. It is estimated that approximately USD 0.6 million will need tobe invested at each of the top 30 Novartis locations and around USD 60 thousand at each of the remaining smaller locationsmeaning that an overall investment of around USD 30 million will be needed.


Comment

C2.5

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(C2.5) Describe where and how the identified risks and opportunities have impacted your business.

Impact Description

Productsandservices

Impacted Our products and services have both threat and opportunity. Threats to the business include rising costs due to carbon pricingframeworks designed to achieve climate mitigation, risks to reputation if we don't behave as a responsible corporate citizen, loss ofbiodiversity that will disrupt our supply chain and the physical impacts from climate change that will introduce risk into our sites, thecommunities we serve and our patients. These impacts are being felt through EU ETS in Europe for a pricing scheme, and the otherimpacts may occur in multiple markets. Increased costs could impact the bottom line and reduce funding for research and developmentof new drugs. Previously, energy costs have exceeded USD 311 million annually. Future increases in both energy prices and theimplementation of carbon costs may have a stronger impact of estimated 20-30% of energy cost in the long-term, i.e. USD 62-93 millionper year. Estimates are based on the range of expected price increases in trading schemes and proposed carbon taxes. While these arehighly variable in projections, the rapid price increase in the EU ETS is an obvious example of the increasing financial risk posed by ourcarbon footprint. In the last 12 months, the cost of allowances in the EU ETS has increased from €15 to €27, driven in part by theintroduction of the Market Stability Reserve in 2019 in attempt to reduce the amount of allowances in the market and stimulate the focuson emissions reduction by industry. Multiple institutions expect the costs within the EU ETS alone to increase to between €40-80 by 2021and between €50-100 by 2030. This would have a medium-low impact as a result of diversion of funds.

Supplychainand/orvaluechain

Impacted Due to the integrated nature of systems of systems, our supply chain could be impacted by heat, drought, flooding and sea level rise.Those impacts would be felt through decreasing biodiversity due to heat and drought. We have already seen disruptions to supply chainoperations in multiple countries due to flooding and carbon emissions. Specifically India, Japan and Houston have seen flooding disruptsupply chain operations related to transportation and logistics. Additionally, we have seen closures in multiple commercial supply chainsin China as a result of emissions during the autumn in multiple years recently, and anticipate that this disruption may continue.Alternatively, our ability to work with our supply chain to reduce their footprint will reduce their potential exposure to climate pricingschemes, reputational risk and operational disruptions. This would have a medium impact.

Adaptationandmitigationactivities

Impacted Risk to the operations and supply chain may exist due to flooding, sea level rise, heat and drought. As described elsewhere in thesubmission, all of these variables can impact the ability of sites to function, associates to get to work and the supply chain to deliverneeded goods and services. An opportunity exists for Novartis to identify risks, recognize the financial impact and take appropriateactions to reduce or manage that risk. By doing so in advance of other companies, Novartis could maintain market share and in somecases increase market share against competitors if their operations are disrupted as a result of climate change due to a lack ofassessment and planning. Additionally, Novartis can benefit in reputation and talent management by leading in climate risk assessmentand climate adaptation. This would have a medium-low impact.

Investmentin R&D

Not yetimpacted

Novartis may face risks if it does not recognize shifting markets and market conditions as heat and humidity increase in multiple marketsas a result of climate change. Changes in non-communicable diseases may represent challenges and opportunity as disease vectorschange and the most effective way to deliver medicine in those changing environments may evolve. While not impacted yet, this mayhave a medium-low impact in the future. It will likely take 2-3 years before adjustments are made to the strategic R&D investment cyclesas a result of climate related issues.

Operations Impacted Operations may be impacted by climate change due to disruptions in the power grid, transportation and logistics networks supportingmovement of associates, goods and services. Additionally, operations may be impacted by increasing non-energy costs of electricity. Inthe last 12 months, the cost of allowances in the EU ETS has increased from €15 to €27, driven in part by the introduction of the MarketStability Reserve in 2019 in attempt to reduce the amount of allowances in the market and stimulate the focus on emissions reduction byindustry. Multiple institutions expect the costs within the EU ETS alone to increase to between €40-80 by 2021 and between €50-100 by2030.Aggressive movement in efficiency and adoption of renewables can eliminate that risk and turn it into a competitive advantage forthe company in reducing the exposure to carbon pricing described elsewhere in this submission. This will have a medium impact.

Other,pleasespecify

We have notidentifiedany risks oropportunities

While we recognize risks in most categories as described above, it is still too early to describe in specific financial detail how the otherrisk and opportunity elements may impact the business. Each of the risks and opportunities will be examined in priority order over time.

C2.6

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(C2.6) Describe where and how the identified risks and opportunities have been factored into your financial planningprocess.

Relevance Description

Revenues Impacted In the last 12 months, the cost of allowances in the EU ETS has increased from €15 to €27, driven in part by the introduction of theMarket Stability Reserve in 2019 in attempt to reduce the amount of allowances in the market and stimulate the focus on emissionsreduction by industry. Multiple institutions expect the costs within the EU ETS alone to increase to between €40-80 by 2021 andbetween €50-100 by 2030. These projected cost increases as well as increasing energy costs are consistently briefed to impactedChief Financial Officers (CFOs) within Novartis so financial planning can be adjusted, and mitigation strategies put into place, usuallythrough efficiency and shift to renewables.

Operatingcosts

Impacted In the last 12 months, the cost of allowances in the EU ETS has increased from €15 to €27, driven in part by the introduction of theMarket Stability Reserve in 2019 in attempt to reduce the amount of allowances in the market and stimulate the focus on emissionsreduction by industry. Multiple institutions expect the costs within the EU ETS alone to increase to between €40-80 by 2021 andbetween €50-100 by 2030. These projected cost increases as well as increasing energy costs are consistently briefed to impactedChief Financial Officers (CFOs) within Novartis so financial planning can be adjusted, and mitigation strategies put into place, usuallythrough efficiency and shift to renewables.

Capitalexpenditures/ capitalallocation

Impacted In the last 12 months, the cost of allowances in the EU ETS has increased from €15 to €27, driven in part by the introduction of theMarket Stability Reserve in 2019 in attempt to reduce the amount of allowances in the market and stimulate the focus on emissionsreduction by industry. Multiple institutions expect the costs within the EU ETS alone to increase to between €40-80 by 2021 andbetween €50-100 by 2030. These projected cost increases as well as increasing energy costs are consistently briefed to impactedChief Financial Officers (CFOs) within Novartis so financial planning can be adjusted and mitigation strategies put into place. This isusually achieved through efficiency, the shift to renewables and appropriate physical / process adaptations which are implemented anddisclosed in alignment with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. The increasing price ofenergy and increasing prices of carbon pricing are accounted for in the implementation of an internal price of carbon. That shadowprice of USD 100 per ton provides a useful estimate of the increasing real costs of carbon in operations, and is guiding capitalinvestments in efficiency and renewables. This may have a medium impact.

Acquisitionsanddivestments

Notevaluated

This has not been evaluated yet.

Access tocapital

Notimpacted

No impact has been indicated in early discussions.

Assets Impacted forsomesuppliers,facilities, orproduct lines

Hypothetical possible impact of 8 severe weather events over a 12 year period with a maximum impact of USD 5 million per event for atotal of USD 40 million assessed in combination with MIT Joint Program and internal staff.

Liabilities Notevaluated

This has not been evaluated yet.

Other We have notidentifiedany risks oropportunities

Evaluation of multiple other factors will continue as this effort becomes more mature. Highest priority will likely be given to larger impactareas, and evaluation may be a multi-year process to include refreshing valuations of areas with definite impact.

C3. Business Strategy

C3.1

(C3.1) Are climate-related issues integrated into your business strategy?Yes

C3.1a

(C3.1a) Does your organization use climate-related scenario analysis to inform your business strategy?Yes, qualitative and quantitative

C3.1c

CDP Page of 6524

(C3.1c) Explain how climate-related issues are integrated into your business objectives and strategy.

In 2018, building trust with society became a top strategic priority for Novartis. We aim to hold ourselves to the highest ethicalstandards, be part of the solution on pricing and access to medicines, tackle complex global health challenges and do our part as aresponsible global citizen. The most significant decision in 2018 related to climate was the adoption of a new company wideenvironmental strategy. This includes a focus on energy and climate resilience, with the aspiration to become carbon neutral by 2025and plastic and water neutral by 2030. In addition to Novartis using only renewable energy (carbon neutral own operations) scope 1and 2, the strategy set a target to reduce our overall carbon footprint (scope 1, 2 and 3) by half by 2030 therefore including businesstravel, employee commuting, and the use of our products. This will be achieved by meeting our newly approved Science Based target(SBTi) of a 35% reduction in absolute carbon emissions across our value chain and the additional use of credible, transparent carbonsequestration projects (offsets) through natural climate solutions including forestry projects owned by Novartis. This decision will driveoperational, financial and business development decisions in the future as part of the strategic framework.

At Novartis risk and strategic processes are integrated in a cross-functional risk management approach because they belongtogether. A holistic view of Novartis risks is gathered and consolidated in the Novartis Risk Compass which enables seniormanagement, Executive Committee of Novartis and the Novartis Board of Directors to focus discussions on key strategic risks andalign the company strategy and our risk exposure. The functions included are Corporate Finance, People & Organization, BCM &Novartis Emergency Management, Integrity and Compliance, HSE (Health, Safety, Environment), Information security, Data privacy,Quality assurance and Third Party Risk Management (TPRM), thus including strategical direction, direct operations and supply chain.This allows holistic approach to determine our risk exposure followed by defining the scope of risk management activities,understanding the external and internal context in which Novartis operates, defining criteria of the potential impact of each risk andthe likelihood that each risk will occur. The updated enterprise risk management (ERM) process includes a risk identification top downfrom all business units of Novartis as well as the supporting functions that is known as the One Risk Discussion. In addition, the riskidentification is bottom up from the countries. All these outputs are then consolidated into the Risk Compass of Novartis which iscontinually monitored by the risk and resilience team. This process is repeated annually and information on climate related risks(physical and transition) are provided to be used in this process. Identified risks in all categories, including climate, then drivestrategic decisions related to adaptation and control measures as well as changes to business processes such as shifting to theprocurement of renewable energy.

Multiple opportunities exist which could create competitive advantage from climate change. These include actions to reduce energyconsumption and associated greenhouse gases, climate mitigation as well as collaborative efforts to create climate resilience incommunities where we operate. The avoidance of carbon taxes will reduce cost and complexity relative to other organizations.Proactively managing climate change risks will create shareholder value by positioning Novartis positively to investors such asBlackRock and Vanguard who, along with others, are increasingly prioritizing sustainability performance. Novartis' brand value willalso be enhanced enabling the company to attract, recruit and retain the best talent. Discrete business opportunities may also existas disease vectors change due to climate change related to both communicable and non-communicable diseases.

We have a dual strategy for greenhouse gas (GHG) emission reduction primarily from energy and fuel usage e.g., to improve energyefficiency and to adopt renewable energy sources. Efficiency serves as the foundation for all other efforts making implementation ofdistributed generation, distributed storage and demand response management more effective in reducing GHG emissions andbuilding climate resilience in support of business continuity. Research has shown that companies who focus on sustainability achievemore positive financial returns because of the long term focus on the resilience of the company. Novartis management is also guidedby input from a variety of stakeholders (BlackRock, Vanguard, We Mean Business, institutional investor letters to our CEO) indeveloping climate change requirements. The influence of impact investors, non-profit organizations and shareholders is increasinglyimpacting how policy is crafted. Internally we ensure progress by target setting, performance reporting and an annual process ofmanagement review.

Business and operations may be impacted by the growing effects of climate change and shifting weather patterns. With energy, GHGemissions and water resources becoming greater cost factors efficiency improvements and alternate sources will become moreimportant. In the long term the increasingly severe affects of rising sea levels, extreme weather, changing precipitation patterns andwater scarcity could also influence the way Novartis selects new locations and how these would be protected against the effects ofclimate change.

CDP Page of 6525

Climate issues caused a change in Novartis' energy procurement strategy. After the successful completion of a renewable powerpurchase agreement in the US that achieved carbon neutrality in that market for procured electricity we are now actively pursuing apan-European power purchase agreement that will achieve the same, decarbonizing our purchased electricity in one of our largestregions of operations and eliminating transition risk associated with carbon pricing. Other major markets will follow for the samereason.

The negative impact of climate change is also being considered as the first round of more detailed climate risk assessmentscompleted this year. These have been shared with members of production, finance and facilities to create a more holistic integratedrisk management strategy. Applicable production and facility stuff have been provided with initial data to help them validate orchallenge footprint decisions. In the future this should be available at the beginning of all footprint discussions and would possiblyinclude the context of regional supply chains as we examine where to most effectively produce our critical medicines.

C3.1d

(C3.1d) Provide details of your organization’s use of climate-related scenario analysis.

Climate-relatedscenarios

Details

Nationallydeterminedcontributions(NDCs)

Novartis is conducting both sensitivity and stress testing for climate and water in a long term horizon, and is basing many of the variables on a "ParisForever" scenario based on nationally determined contributions. This scenario is perceived as the most likely future and assumes that climate policyremains constant in the wake of the Paris Accord after 2030, and that significant technology advancements in low-carbon emissions technologies donot scale in markets in the near future. This represents a conservative approach to risk, and does not assume improvements that would requiresignificant policy or technology changes. In partnership with the Massachusetts Institute of Technology (MIT) Joint Program on the Science andPolicy of Global Change, Novartis is conducting a multi-phase project for detailed climate risk analysis of a key site and an initial global assessmentof critical sites for the production and research portions of the company that will inform follow on detailed analyses of risk. MIT Joint Program usesan Integrated Global System Model (IGSM) which is a flexible model that joins detailed models of the Earth’s climate system and the human driveneconomic system through combined use of the MIT Earth System Model (MESM) and the MIT Economic Projection and Policy Analysis (EPPA)model. The flood modelling uses sensitivity analysis to examine a changing set of inputs related to 24 hour precipitation data and combined impactof sea level rise and storm surge. The flood risk assessment is a stress test using multiple Monte Carlo simulations through a set of transfer functionsthat include precipitation to depth, depth to damage, risk of depth and expected resultant damages. The output of this model will be aligned with atailored Climate Change Vulnerability Index (CCVI) that is being co-created by MIT Joint Program and Novartis, and will be deployed in multipleMonte Carlo simulations globally to bound both probability and uncertainty of climate outcomes. This entire collaboration between Novartis and MITJoint Program is a first of kind partnership for MIT with a commercial and industrial partner to design a credible, repeatable climate risk methodologyfor global operations. This forward looking data showing various pathways are then provided to applicable staff in production, procurement, facilities,finance, risk and business continuity staff so it can be considered in the existing integrated risk management process as well as influencing decisionsin daily business such as utilities procurement. This integrated process should make Novartis more resilient and enable us to serve our patients evenas risks and opportunities in markets and communities change. Results from the analysis delivered in late 2018 have been provided to leadershipand will be used to make decisions on risk mitigation requirements as well as possible opportunities. This round of discussions is expected to lastthrough to 2019 before significant decisions are considered in coordination with other company priorities and changes.

C4. Targets and performance

C4.1

(C4.1) Did you have an emissions target that was active in the reporting year?Absolute target

C4.1a

(C4.1a) Provide details of your absolute emissions target(s) and progress made against those targets.

Target reference number

CDP Page of 6526

Abs 1

ScopeScope 1 +2 (market-based)

% emissions in Scope100

Targeted % reduction from base year100

Base year2016

Start year2018

Base year emissions covered by target (metric tons CO2e)1320363

Target year2025

Is this a science-based target?Yes, this target has been approved as science-based by the Science-Based Targets initiative

% of target achieved12.9

Target statusNew

Please explainThe Novartis target is to reduce combined Scope1 and Scope2 (market-based) GHG emissions by 100% by 2025 based on 2016emissions. The -100% by 2025 Scope 1 + 2 targets have been confirmed to be science-based by response from the SBT initiativeas part of a larger corporate target of 35% absolute emissions reductions across the entire value chain. The status achieved in2018 is a 12.9% reduction of emission from our industrial operations.

Target reference numberAbs 2

ScopeScope 1+2 (market-based) +3 (upstream & downstream)

% emissions in Scope100

Targeted % reduction from base year35

Base year2016

Start year2018

Base year emissions covered by target (metric tons CO2e)8216446

Target year2030

Is this a science-based target?Yes, this target has been approved as science-based by the Science-Based Targets initiative

% of target achieved7

Target statusNew

CDP Page of 6527

Please explainNovartis received approval for Science Based Targets to achieve a 35% reduction in Scope 1, 2 and 3 emissions by 2030. This ispart of a larger overall environmental sustainability strategy that includes water and waste goals as well. The focus in the companyis to reduce absolute emissions by 35% through efficiency and aggressive adoption of renewables, and then to reduce our footprinteven further for a minimum of a 50% value chain footprint reduction by leveraging credible, transparent offsets against ownoperations and supply chain where needed.

C4.2

(C4.2) Provide details of other key climate-related targets not already reported in question C4.1/a/b.

C4.3

(C4.3) Did you have emissions reduction initiatives that were active within the reporting year? Note that this can includethose in the planning and/or implementation phases.Yes

C4.3a

(C4.3a) Identify the total number of initiatives at each stage of development, and for those in the implementation stages, theestimated CO2e savings.

Number of initiatives Total estimated annual CO2e savings in metric tonnes CO2e (only for rows marked *)

Under investigation 15 590000

To be implemented* 15 590000

Implementation commenced* 3 15000

Implemented* 4 222133

Not to be implemented 5 500

C4.3b

(C4.3b) Provide details on the initiatives implemented in the reporting year in the table below.

Initiative typeEnergy efficiency: Building services

Description of initiativeBuilding controls

Estimated annual CO2e savings (metric tonnes CO2e)1000

ScopeScope 2 (market-based)

Voluntary/MandatoryVoluntary

Annual monetary savings (unit currency – as specified in C0.4)200000

Investment required (unit currency – as specified in C0.4)300000

CDP Page of 6528

Payback period1-3 years

Estimated lifetime of the initiative6-10 years

CommentBuilding controls were implemented in two sites in Slovenia that allowed for greater real time awareness of energy consumption,allowing for immediate adjustments to major systems to include heating ventilation and air conditioning (HVAC) and significantmotors, pumps and drives. Decreased consumption reduced Scope 2 carbon footprint while also delivering energy cost savings tothe site.


Description of initiativeBuilding controls


ScopeScope 1




Payback period1-3 years


CommentBuilding controls were implemented in two sites in Slovenia that allowed for greater real time awareness of energy consumption,allowing for immediate adjustments to major systems to include heating ventilation and air conditioning (HVAC) and significantmotors, pumps and drives. Decreased consumption reduced Scope 1 carbon footprint while also delivering energy cost savings tothe site.

Initiative typeLow-carbon energy purchase

Description of initiativeWind






Payback period4 - 10 years

CDP Page of 6529


CommentA virtual power purchase agreement (PPA) was awarded to Invenergy to build new wind generation capacity in Texas, using EdisonEnergy as our buyer's agent into the market. Novartis is an off-taker for 100 MW of capacity from this 300 MW capacity project.Construction commenced in 2018, and the project is now fully operational and providing carbon free energy to the grid. This projectwas the first PPA for Novartis, and will make Novartis carbon neutral in Scope 2 emissions for electricity in the US market. Annualsavings of 220,000 tons of carbon are the equivalent of removing 48,000 cars from the road.


Description of initiativeHVAC






Payback period4 - 10 years


CommentCooling technology optimization in Singapore through installation of high-efficiency chillers as part of a normal recapitalizationproject.

C4.3c

(C4.3c) What methods do you use to drive investment in emissions reduction activities?

Method Comment

Internal price oncarbon

Novartis uses an internal shadow price of carbon of USD 100 per metric ton of carbon equivalent to influence decisions on capitalinvestments. As described elsewhere in this submission in more detail, this is meant to show a more holistic approach to long term financialimpact of investments that yield a sustainability improvement.

Marginal abatementcost curve

A marginal abatement cost curve was used to design a new round of internal investments for efficiency, renewables and offsets. A portfolioapproach to sustainability yields a positive financial benefit as well as a positive carbon benefit to the company.

Lower return oninvestment (ROI)specification

Novartis financial guidance specifies that investments specifically focused on energy efficiency shall have return on investment calculatedfor the life of the asset as opposed to a shorter period of time for other investments, resulting in a lower hurdle rate for those investments.

Internalincentives/recognitionprograms

Internal award programs exist to recognize Novartis associate’s efforts to reduce the carbon footprint of the company. These programs aresponsored by Global Health and Corporate Responsibility and Real Estate and Facility Services.

Employeeengagement

Employee engagement programs were initiated in 2018 to raise awareness of the new corporate target for carbon neutrality in ownoperations and a 50% reduction in value chain carbon emissions. Engagements included internal social media posts, environmentalnetwork community calls, and onsite employee engagement in Cambridge (MA), Basel, Barcelona using external consultants to informdevelopment and execution of more comprehensive employee engagement campaigns.

CDP Page of 6530

C4.5

(C4.5) Do you classify any of your existing goods and/or services as low-carbon products or do they enable a third party toavoid GHG emissions?Yes

C4.5a

(C4.5a) Provide details of your products and/or services that you classify as low-carbon products or that enable a third partyto avoid GHG emissions.

Level of aggregationGroup of products

Description of product/Group of productsSandoz, the generic products business unit of Novartis, is a leading producer of anti-infective Active Pharmaceutical Ingredients (AIAPIs). Our manufacturing portfolio of AI APIs is predominantly located in Europe (Austria, Germany, Italy, Slovenia and Spain).Sandoz/Novartis is one of the few pharma companies that produces AI APIs outside China and India. We put high efforts in theenergy efficiency of our manufacturing processes for AI APIs and achieved up to 30% energy efficiency improvement of theseprocesses over the last 10 years. Furthermore, the carbon intensity of the energy used at our locations in Europe is by far lowercompared the carbon intensities in China and India. Carbon Footprint LCA assessments of our AI API products have demonstratedthat the per ton carbon impact of our products is in the order of magnitude of 16 kg CO2e/kg API compared to 35 to 48 kg CO2e/kgAPI when produced in China or India. They have a 2 to 3 times lower carbon footprint compared to most other AI APIs. Therefore,we consider the Sandoz AI APIs as low-carbon products.

Are these low-carbon product(s) or do they enable avoided emissions?Low-carbon product

Taxonomy, project or methodology used to classify product(s) as low-carbon or to calculate avoided emissionsOther, please specify (Carbon footprint LCA assessments of our products)

% revenue from low carbon product(s) in the reporting year4

Comment

C5. Emissions methodology

C5.1

CDP Page of 6531

(C5.1) Provide your base year and base year emissions (Scopes 1 and 2).

Scope 1

Base year startJanuary 1 2016

Base year endDecember 31 2016

Base year emissions (metric tons CO2e)535235

CommentIn 2018, Novartis approved a new environmental sustainability strategy to become carbon neutral in own operations by 2025. TheNovartis target is to reduce combined Scope 1 and Scope 2 (market-based) GHG emissions by 100% by 2025 based on 2016emissions.

Scope 2 (location-based)





Scope 2 (market-based)





C5.2

(C5.2) Select the name of the standard, protocol, or methodology you have used to collect activity data and calculate Scope1 and Scope 2 emissions.The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (Revised Edition)

C6. Emissions data

C6.1

CDP Page of 6532

(C6.1) What were your organization’s gross global Scope 1 emissions in metric tons CO2e?

Reporting year

Gross global Scope 1 emissions (metric tons CO2e)548073

Start dateJanuary 1 2018

End dateDecember 31 2018

Comment

C6.2

(C6.2) Describe your organization’s approach to reporting Scope 2 emissions.

Row 1

Scope 2, location-basedWe are reporting a Scope 2, location-based figure

Scope 2, market-basedWe are reporting a Scope 2, market-based figure

CommentAccording to the GHG Protocol Scope 2 Guidance

C6.3

(C6.3) What were your organization’s gross global Scope 2 emissions in metric tons CO2e?

Reporting year

Scope 2, location-based899363

Scope 2, market-based (if applicable)666798

Start dateJanuary 1 2018

End dateDecember 31 2018

Comment

C6.4

(C6.4) Are there any sources (e.g. facilities, specific GHGs, activities, geographies, etc.) of Scope 1 and Scope 2 emissionsthat are within your selected reporting boundary which are not included in your disclosure?No

C6.5

(C6.5) Account for your organization’s Scope 3 emissions, disclosing and explaining any exclusions.

CDP Page of 6533

Purchased goods and services

Evaluation statusRelevant, calculated

Metric tonnes CO2e4856001

Emissions calculation methodologyThe amount of Scope 3 GHG emissions for purchased goods and services reported here is the result of an analysis of theNovartis’s third party spend on packaging, raw materials, services and other relevant categories across all business units in 2018.The amount includes all tiers of suppliers in the material’s value chain. The environmental impacts are valued using damage-cost-based shadow prices. Annually, the shadow prices are determined by an inflation adjustment of the previous year´s values. Theemission is then calculated using EnScan (Environmental Supply chain accounting Novartis) which is based on GlobalEnvironmental Extended Input-Output Model (EEIO). The analysis considers average emission intensities by industry sector andincorporates regional trade flows and inter-relationships to calculate emissions from spend data. Finally, the emission valuesobtained for each category are aggregated and reported.

Percentage of emissions calculated using data obtained from suppliers or value chain partners10

ExplanationNovartis initiated EEIO analysis in 2015 and since then Novartis performed the assessment on a yearly basis and refined theapproach and the level of detail over time. In 2018, Novartis participated in the CDP Supply Chain program. Novartis spreadsawareness about climate-related risks and enable its suppliers to share their activities and challenges around climate, water andwaste. The input is used to encourage our suppliers to minimize the environmental impact of our activities and products over theirlife cycle. When removing Alcon emissions from the baseline due to their spin-off in 2019, Novartis cut emissions in this categoryby 4% from 2017 to 2018 in this category. The significant share of which comes from our steps towards environmental sustainablepackaging and following best practices of inventory optimization.

Capital goods



Emissions calculation methodologyThe emission is calculated using average spend-based method, wherein capital purchases of 2018 that constitutes over 90% of ourcapital expenditure goods across all Business Units are considered. Top categories identified are Construction, IT Hardware andSoftware, Production Equipment and Laboratory Supplies & Equipment. The emission factors for spend under these categorieswas obtained from PwC ESCHER (Efficient Supply Chain Emissions Reporting) model. In 2017, PwC did an analysis of Novartis’environmental impacts associated with global supply chain using an Environmental Extended Input-Output (EEIO) model. Thismodel was developed and maintained by PwC using data from the Global Trade and Analysis Project.


ExplanationThough spend on Capital Goods may significantly fluctuate from year to year as Novartis is committed to R&D. Our efforts cutacross the company resulted in 10% of reduction {Novartis without Alcon} in emissions in this category compared to 2017, asNovartis teams continue to find new ways to improve the effectiveness and efficiency of our operations.

CDP Page of 6534

Fuel-and-energy-related activities (not included in Scope 1 or 2)



Emissions calculation methodologyFuel and energy-related activities emissions reported here are derived from the data on upstream fuel consumption and energypurchased in 2018. Emissions are calculated using upstream emission factors per unit of consumption wherein upstream emissionfactors are obtained by excluding combustion emission factor from life cycle emission factor. We have considered emission lossesassociated with grid transmission and distribution of electricity. Novartis used 2018 UK Government’s Greenhouse Gas ConversionFactors and IEA Statistics for transmission and distribution (T&D) Losses, IPCC Guidelines for emission factors.


ExplanationNovartis already had significant improvement in this category by resorting to use only clean energy. For on-site energy generation,coal is completely avoided while fossil waste fuels contributes less than 2% of fuel purchases. Novartis achieved 5% decrease inEnergy Consumption per interior gross floor area as well as 5% decrease in energy consumption per employee headcount fromlast year (2017).

Upstream transportation and distribution



Emissions calculation methodologyThe amount of Scope 3 GHG emissions for this category is the result of an analysis of the Novartis’s third party spend onwarehousing and transportation in 2018. The emission is then calculated using EnScan (Environmental Supply chain accountingNovartis) which is based on Global Environmental Extended Input-Output Model (EEIO).


ExplanationSince 2018, Novartis initiated and engaged in keen analysis of its warehousing, distribution and transportation activities fromemission and carbon footprint point of view. Novartis includes these insights into its decision making and is taking actionable stepsto decrease its environmental footprint. In addition, Novartis is working on projects to improve the data needed for this category andanalysing upstream supply chain of each site/plant separately.

CDP Page of 6535

Waste generated in operations



Emissions calculation methodologyThe Scope 3 GHG emissions for this category is the result of data collected around amount and type of operational waste producedacross all business units in 2018. All types of hazardous and non-hazardous waste related to the sites business operations(excluding construction debris) are considered. The emission factors are mapped using waste output-route based model assessedby external consultancy. For each waste type, output-routes considered are – Recycling, Treatment, Incineration with or withoutenergy and Landfill. Finally, the emission values obtained for each category are aggregated and reported. Notes: 1. On-siteincineration of fossil waste is considered in Scope 1 emissions (on-site energy generation). Thus excluded from Scope 3. 2.Treatment of wastewater generated in operations is not considered in reporting emissions since these are not material to the finalemissions figure for this category. A previous study showed that this is less than 20% of emissions in this category.


ExplanationRecycling/reuse of total operation waste is going up year-on year and stood at 68.5%. The solvent waste is found to be the largestcontributor to the greenhouse gas GHG emissions for this category (34%)

Business travel



Emissions calculation methodologyThe Scope 3 GHG emissions for this category are obtained from our logistics solution partner. The data considers all aircraft travelrelated data for Novartis employees plus service providers on their trips for Novartis in 2018. The calculations are based on theguidelines provided by DEFRA/DECC’s GHG conversion factors, including factoring of actual distance flown, uplift-factor and classof flight. A company-wide assessment showed that most significant emissions from transportation of employees for business-related activities by third-party relates to air travel, For this reason it was decided to include only air travel in this category.


Explanation

Employee commuting



Emissions calculation methodologyThe Scope 3 GHG emissions for this category are derived using average-data model. The “per capita emission” factor used for thismodel is based on the assessment performed by an external consultancy in 2009. In this assessment, region wise commutingpatterns of employees using private and public transport were studied and modelled. The average employee headcount for 2018was multiplied with per capita emission to obtain the emission in this category.


Explanation

CDP Page of 6536

Upstream leased assets

Evaluation statusNot relevant, explanation provided

Metric tonnes CO2e<Not Applicable>

Emissions calculation methodology<Not Applicable>

Percentage of emissions calculated using data obtained from suppliers or value chain partners<Not Applicable>

ExplanationThe emissions associated with leased assets (including leased cars) are under operational control of Novartis and are already partof Scope 1 and 2 emissions. Hence, this Scope 3 category is not considered to be relevant.

Downstream transportation and distribution



Emissions calculation methodologyThe emission is calculated using distance-based method (the distance is multiplied by mass of goods transported and relevantemission factors that incorporate average fuel consumption, average utilization, average size and mass or volume of the goods andthe vehicles, and their associated GHG emissions). The distance is based on the transportation model obtained from anassessment performed by external consultancy in 2009. Notes: 1> Above method is chosen as Novartis doesn’t have access tofuel records from downstream transport vehicles and/or shipments do not consume entire vehicle/vessel. 2> Novartis doesn’t havekey over-the-counter (OTC) drugs, hence we have not considered patient travel data for pick-up of medical products.


Explanation

Processing of sold products





ExplanationThis Scope 3 category is not considered to be relevant as only a few Novartis products (pharmaceutical finished drugs) areprocessed further after they are sold. To sell intermediate products is not our business model.

CDP Page of 6537

Use of sold products



Emissions calculation methodologyThe use of Novartis products (Pharmaceutical Finished Drugs) does not generally result in GHG emissions, with the exception of apropellant based inhaler. All quantities of HFC used for its production in 2018 are measured. Life cycle GHG emissions arecalculated using the IPCC emissions factor for HFC-134a.


Explanation

End of life treatment of sold products





ExplanationThis Scope 3 category is not considered to be relevant as Novartis' pharmaceutical products (tablets, injectables, etc.) areconsumed by patients and therefore no GHG emissions associated with the end of life treatment of sold Novartis products occur bythat. Novartis has only a few medical device products (e.g. inhalers, auto-injectors, surgery tools and contact lenses) of which theScope 3 emissions from inhalers (major source) are already considered in category 11 "Use of sold products". For the remainingproducts, it was assessed that GHG emissions are not material.

Downstream leased assets





ExplanationNovartis screened the leased assets to conclude that leased out buildings are less than 1% of overall building inventory andemissions from them would not material to the overall category.

CDP Page of 6538

Franchises





ExplanationThis category is not relevant as Novartis is not in the franchise business.

Investments





ExplanationGHG emissions associated with Novartis’s investment in other companies are not considered relevant. Novartis has limitedpotential to influence their emissions. This category is material to companies that provide financial services. Hence, this category isnot significant to Novartis.

Other (upstream)





ExplanationNo other upstream emissions were identified during our screening of relevant Scope 3 activities.

Other (downstream)





ExplanationNo other downstream emissions were identified during our screening of relevant Scope 3 activities.

CDP Page of 6539

C6.7

(C6.7) Are carbon dioxide emissions from biologically sequestered carbon relevant to your organization?Yes

C6.7a

(C6.7a) Provide the emissions from biologically sequestered carbon relevant to your organization in metric tons CO2.

Row 1

Emissions from biologically sequestered carbon (metric tons CO2)64934

Comment

C6.10

CDP Page of 6540

(C6.10) Describe your gross global combined Scope 1 and 2 emissions for the reporting year in metric tons CO2e per unitcurrency total revenue and provide any additional intensity metrics that are appropriate to your business operations.

Intensity figure0.00002341

Metric numerator (Gross global combined Scope 1 and 2 emissions)1214871

Metric denominatorunit total revenue

Metric denominator: Unit total51900000000

Scope 2 figure usedMarket-based

% change from previous year8.1

Direction of changeDecreased

Reason for changeNominal total Scope 1 and Scope 2 GHG emissions have decreased between 2017 and 2018, from 1250.4 kt CO2e in 2017 to1214.9 kt CO2e in 2018 as a result of the implementation of energy savings projects combined with increased sourcing ofrenewable electricity in 2018 (+20%, from 2.34 GJ in 2017 to 2.82 GJ in 2018) while sales have increased from USD 49.15 millionin 2017 to USD 51.9 million in 2018.

Intensity figure9.99

Metric numerator (Gross global combined Scope 1 and 2 emissions)1214871

Metric denominatorfull time equivalent (FTE) employee

Metric denominator: Unit total121663

Scope 2 figure usedMarket-based

% change from previous year5.6

Direction of changeDecreased

Reason for changeNominal total Scope 1 and Scope 2 GHG emissions have decreased between 2017 and 2018, from 1250.4 ktCO2e in 2017 to1214.9 ktCO2e in 2018 as a result of the implementation of energy savings projects combined with increased sourcing ofrenewable electricity in 2018 (+20%, from 2.34 GJ in 2017 to 2.82 GJ in 2018), while the number of employees has slightlyincreased from 118203 Full Time Equivalents (FTE) in 2017 to 121663 FTE in 2018.

C7. Emissions breakdowns

C7.1

(C7.1) Does your organization break down its Scope 1 emissions by greenhouse gas type?Yes

CDP Page of 6541

C7.1a

(C7.1a) Break down your total gross global Scope 1 emissions by greenhouse gas type and provide the source of each usedgreenhouse warming potential (GWP).

Greenhouse gas Scope 1 emissions (metric tons of CO2e) GWP Reference

CO2 537361 IPCC Fifth Assessment Report (AR5 – 100 year)

HFCs 10712 IPCC Fifth Assessment Report (AR5 – 100 year)

SF6 0 IPCC Fifth Assessment Report (AR5 – 100 year)

C7.2

(C7.2) Break down your total gross global Scope 1 emissions by country/region.

Country/Region Scope 1 emissions (metric tons CO2e)

United States of America 149389

Austria 71993

Germany 36428

United Kingdom of Great Britain and Northern Ireland 34354

Slovenia 32242

Spain 29656

Italy 27823

Turkey 14663

Ireland 12735

Japan 12196

Singapore 11703

Poland 11483

Russian Federation 11169

France 11167

Belgium 10285

China 9985

Egypt 6979

Switzerland 6489

India 3986

Indonesia 2887

South Africa 1591

Malaysia 1095

Other, please specify (Rest of World) 37776

C7.3

(C7.3) Indicate which gross global Scope 1 emissions breakdowns you are able to provide.By activity

C7.3c

CDP Page of 6542

(C7.3c) Break down your total gross global Scope 1 emissions by business activity.

Activity Scope 1 emissions (metric tons CO2e)

Manufacturing (onsite combustion and processes) 346706

Administration (onsite combustion and processes) 28572

Research and Development (onsite combustion and processes) 24582

Sales (vehicle emissions) 148213

C7.5

(C7.5) Break down your total gross global Scope 2 emissions by country/region.

Country/Region Scope 2, location-based (metric tonsCO2e)

Scope 2, market-based (metric tonsCO2e)

Purchased and consumedelectricity, heat, steam orcooling (MWh)

Purchased and consumed low-carbon electricity, heat,steam or cooling accounted in market-based approach(MWh)

United States ofAmerica

285303 151989 632539 57149

Switzerland 74952 76053 424790 6547

Austria 50088 0 303784 303780

Slovenia 67484 116621 225487 25878

Italy 37525 2304 144466 102263

Germany 44954 40551 108512 42357

China 44569 49721 87495 3252

India 59994 63801 77332 27800

Singapore 32801 30919 75115 0

Spain 21671 0 73591 53993

Turkey 22084 22084 50094 7243

Malaysia 34180 34180 49579 15

Ireland 20326 800 49103 46597

Indonesia 24678 21832 33537 0

United Kingdom ofGreat Britain andNorthern Ireland

5528 6728 27617 0

Poland 16501 247 23124 20299

France 1175 884 22572 6758

Egypt 9579 9579 20234 0

Belgium 4304 3659 18917 0

Japan 9287 5946 17129 0

Russian Federation 3069 3069 7750 0

South Africa 7349 7349 7383 0

Other, please specify(Rest of World)

21961 18482 75932 28153

C7.6

(C7.6) Indicate which gross global Scope 2 emissions breakdowns you are able to provide.By activity

C7.6c

CDP Page of 6543

(C7.6c) Break down your total gross global Scope 2 emissions by business activity.

Activity Scope 2, location-based emissions (metric tons CO2e) Scope 2, market-based emissions (metric tons CO2e)

Manufacturing 732218 560060

Administration 78642 52903

Research and Development 88503 53835

C7.9

(C7.9) How do your gross global emissions (Scope 1 and 2 combined) for the reporting year compare to those of theprevious reporting year?Decreased

C7.9a

(C7.9a) Identify the reasons for any change in your gross global emissions (Scope 1 and 2 combined) and for each of themspecify how your emissions compare to the previous year.

Change inemissions(metric tonsCO2e)

Directionof change

Emissionsvalue(percentage)

Please explain calculation

Change inrenewableenergyconsumption

14823 Decreased 1.2 The proportion of renewable energy input increased by 20% between 2017 and 2018 (in relation to ournew Environmental Sustainability Strategy) equivalent to an absolute reduction of 14.8 ktCO2e or 1.2%(14.8 / 1250.4 *100) of the gross global emissions 2017 (1250.4 ktCO2e for scope 1 and 2 combined).

Otheremissionsreductionactivities

19714 Decreased 1.6 The emissions reduction projects undertaken in 2018 will achieve emission reductions of 19.7 ktCO2eannually, equivalent to 1.6% reduction (19.7 / 1250.4 *100) of the gross global emissions 2017 (1250.4ktCO2e for scope 1 and 2 combined).

Divestment 978 Decreased 0.1 The divestment of a site in September resulted in an emission reduction of 0.978 ktCO2e for 2018,equivalent to a 0.1 % reduction (0.978 / 1250.4 *100) of the gross global emissions 2017 (1250.4ktCO2e for scope 1 and 2 combined).

Acquisitions 0 No change 0 no restatement linked to acquisitions in 2018

Mergers 0 No change 0 no involvement in mergers

Change inoutput

0 No change 0 no major change in output at Novartis facilities

Change inmethodology

0 No change 0 no change in methodology

Change inboundary

0 No change 0 no change in boundary

Change inphysicaloperatingconditions

0 No change 0 no change in physical operating conditions

Unidentified 0 No change 0 no unidentified changes

Other 0 No change 0 no other changes

C7.9b

(C7.9b) Are your emissions performance calculations in C7.9 and C7.9a based on a location-based Scope 2 emissions figureor a market-based Scope 2 emissions figure?Market-based

CDP Page of 6544

C8. Energy

C8.1

(C8.1) What percentage of your total operational spend in the reporting year was on energy?More than 0% but less than or equal to 5%

C8.2

(C8.2) Select which energy-related activities your organization has undertaken.

Indicate whether your organization undertakes this energy-related activity

Consumption of fuel (excluding feedstocks) Yes

Consumption of purchased or acquired electricity Yes

Consumption of purchased or acquired heat Yes

Consumption of purchased or acquired steam Yes

Consumption of purchased or acquired cooling No

Generation of electricity, heat, steam, or cooling Yes

C8.2a

(C8.2a) Report your organization’s energy consumption totals (excluding feedstocks) in MWh.

Heating value MWh from renewablesources

MWh from non-renewablesources

Total MWh

Consumption of fuel (excluding feedstock) LHV (lower heatingvalue)

43754 1857766 1901520

Consumption of purchased or acquired electricity <Not Applicable> 732084 1439198 2171282

Consumption of purchased or acquired heat <Not Applicable> 0 323307 323307

Consumption of purchased or acquired steam <Not Applicable> 0 61494 61494

Consumption of purchased or acquired cooling <Not Applicable> <Not Applicable> <Not Applicable> <NotApplicable>

Consumption of self-generated non-fuel renewableenergy

<Not Applicable> 6681 <Not Applicable> 6681

Total energy consumption <Not Applicable> 782519 3681765 4464284

C8.2b

(C8.2b) Select the applications of your organization’s consumption of fuel.

Indicate whether your organization undertakes this fuel application

Consumption of fuel for the generation of electricity No

Consumption of fuel for the generation of heat No

Consumption of fuel for the generation of steam Yes

Consumption of fuel for the generation of cooling No

Consumption of fuel for co-generation or tri-generation Yes

CDP Page of 6545

C8.2c

(C8.2c) State how much fuel in MWh your organization has consumed (excluding feedstocks) by fuel type.

Fuels (excluding feedstocks)Natural Gas

Heating valueLHV (lower heating value)

Total fuel MWh consumed by the organization1778372

MWh fuel consumed for self-generation of electricity<Not Applicable>

MWh fuel consumed for self-generation of heat0

MWh fuel consumed for self-generation of steam1599487

MWh fuel consumed for self-generation of cooling<Not Applicable>

MWh fuel consumed for self-cogeneration or self-trigeneration178885

Comment

Fuels (excluding feedstocks)Fuel Oil Number 2








Comment

Fuels (excluding feedstocks)Fuel Oil Number 5




CDP Page of 6546





Comment

Fuels (excluding feedstocks)Other, please specify (Waste, fossil in nature)








Comment

Fuels (excluding feedstocks)Wood








Comment

Fuels (excluding feedstocks)Wood Waste

Heating value

CDP Page of 6547

LHV (lower heating value)







Comment

C8.2d

(C8.2d) List the average emission factors of the fuels reported in C8.2c.

Fuel Oil Number 2

Emission factor0.056

Unitmetric tons CO2e per GJ

Emission factor sourceInternational Energy Agency

Comment

Fuel Oil Number 5

Emission factor0.06

Unitmetric tons CO2 per GJ


Comment

Natural Gas




Comment

CDP Page of 6548

Wood

Emission factor0


Emission factor sourceThe Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (Revised Edition)

CommentBiomass is considered a carbon neutral fuel

Wood Waste

Emission factor0


Emission factor sourceThe Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (Revised Edition)

CommentBiomass is considered a carbon neutral fuel

Other



Emission factor sourceCompany average 2018 based on organic waste solvents mixture

Comment

C8.2e

(C8.2e) Provide details on the electricity, heat, steam, and cooling your organization has generated and consumed in thereporting year.

Total Grossgeneration (MWh)

Generation that is consumed by theorganization (MWh)

Gross generation fromrenewable sources (MWh)

Generation from renewable sources that isconsumed by the organization (MWh)

Electricity 98914 92233 6681 6681

Heat 0 0 0 0

Steam 86651 86651 0 0

Cooling 0 0 0 0

C8.2f

CDP Page of 6549

(C8.2f) Provide details on the electricity, heat, steam and/or cooling amounts that were accounted for at a low-carbonemission factor in the market-based Scope 2 figure reported in C6.3.

Basis for applying a low-carbon emission factorContract with suppliers or utilities ( e.g. green tariff), supported by energy attribute certificates

Low-carbon technology typeSolar PVWindHydropowerBiomass (including biogas)

Region of consumption of low-carbon electricity, heat, steam or coolingOther, please specify (worldwide)

MWh consumed associated with low-carbon electricity, heat, steam or cooling732084

Emission factor (in units of metric tons CO2e per MWh)0

CommentMany of our sites are purchasing green energy from renewable energy sources, mainly from wind, hydropower, biomass and solarsources. The figure reported here is the total amount of energy purchased worldwide, that is generated from renewable energysources. Our reporting guideline stipulates that sites should obtain a certificate issued by a third party guaranteeing the renewableenergy content of the energy mix.

C9. Additional metrics

C9.1

(C9.1) Provide any additional climate-related metrics relevant to your business.

C10. Verification

C10.1

(C10.1) Indicate the verification/assurance status that applies to your reported emissions.

Verification/assurance status

Scope 1 Third-party verification or assurance process in place

Scope 2 (location-based or market-based) Third-party verification or assurance process in place

Scope 3 Third-party verification or assurance process in place

C10.1a

CDP Page of 6550

(C10.1a) Provide further details of the verification/assurance undertaken for your Scope 1 and/or Scope 2 emissions andattach the relevant statements.

ScopeScope 1

Verification or assurance cycle in placeAnnual process

Status in the current reporting yearComplete

Type of verification or assuranceLimited assurance

Attach the statementnovartis-in-society-report-2018.pdf

Page/ section referencePage 50 of the Novartis in Society Report 2018 contains the GHG Scope 1, combustion and process, and vehicles. Page 60 and 61of the document provide the independent assurance report of the Novartis in Society Report.

Relevant standardISAE3000

Proportion of reported emissions verified (%)100

ScopeScope 2 market-based



Type of verification or assuranceLimited assurance


Page/ section referencePage 50 of the Novartis in Society Report 2018 contains the GHG Scope 2, purchased energy (market-based). Page 60 and 61 ofthe document provide the independent assurance report of the Novartis in Society Report.


Proportion of reported emissions verified (%)100

C10.1b

CDP Page of 6551

(C10.1b) Provide further details of the verification/assurance undertaken for your Scope 3 emissions and attach the relevantstatements.

ScopeScope 3- at least one applicable category




Page/section referencePage 50 of the Novartis in Society Report 2018 contains the GHG Scope 3 category 6, business travel. Page 60 & 61 provide theindependent assurance report of the Novartis in Society Report. Please note that P50 of the Novartis in Society Report 2018displays the emission value for Business Travel to be 425.70 kt whereas we are reporting 256.02 kt in C6.5 as these are therestated figures which we have obtained from our logistic partner. The same will be restated in 2019's report.


C10.2

(C10.2) Do you verify any climate-related information reported in your CDP disclosure other than the emissions figuresreported in C6.1, C6.3, and C6.5?Yes

C10.2a

(C10.2a) Which data points within your CDP disclosure have been verified, and which verification standards were used?

Disclosuremoduleverificationrelates to

Data verified Verificationstandard

Please explain

C5. Emissionsperformance

Year on yearchange inemissions (Scope1 and 2)

ISAE3000 Page 50 of the Novartis in Society Report 2018 contains the total GHG emissions Scope 1 and Scope 2 datafrom the previous year, that is also verified during the assurance provision process. Page 60 and 61 of thedocument provide the independent assurance report of the Novartis in Society Report.


Year on yearchange inemissions (Scope1)

ISAE3000 Page 50 of the Novartis in Society Report 2018 contains the total GHG emissions Scope 1 data from theprevious year, that is also verified during the assurance provision process. Page 60 and 61 of the documentprovide the independent assurance report of the Novartis in Society Report.


Year on yearchange inemissions (Scope2)

ISAE3000 Page 50 of the Novartis in Society Report 2018 contains the total GHG emissions Scope 2 data from theprevious year (market-based), that is also verified during the assurance provision process. Page 60 and 61 ofthe document provide the independent assurance report of the Novartis in Society Report.


Year on yearemissionsintensity figure

ISAE3000 Page 50 of the Novartis in Society Report 2018 contains GHG emissions (Scope 1 and Scope 2) intensity dataper sales and per associates, that is also verified during the assurance provision process. Page 60 and 61 of thedocument provide the independent assurance report of the Novartis in Society Report.

C11. Carbon pricing

CDP Page of 6552

C11.1

(C11.1) Are any of your operations or activities regulated by a carbon pricing system (i.e. ETS, Cap & Trade or Carbon Tax)?Yes

C11.1a

(C11.1a) Select the carbon pricing regulation(s) which impacts your operations.EU ETS

C11.1b

(C11.1b) Complete the following table for each of the emissions trading systems in which you participate.

EU ETS

% of Scope 1 emissions covered by the ETS30

Period start dateJanuary 1 2018

Period end dateDecember 31 2018

Allowances allocated114711

Allowances purchased0

Verified emissions in metric tons CO2e141049

Details of ownershipFacilities we own and operate

CommentEmissions covered: 20% Gross global Scope 1 emissions: 548,073 tons CO2e Facilities we own and operate: Kundl LendavaMenges Rovereto Ringaskiddy Grimsby

C11.1d

CDP Page of 6553

(C11.1d) What is your strategy for complying with the systems in which you participate or anticipate participating?

Novartis' target is to be carbon neutral in own operations by 2025, thus eliminating the need to comply with EU ETS. Novartis isaggressively pursuing absolute emissions reductions in order to position most effectively in markets with carbon pricing in place, andto proactively reduce exposure in markets that may adopt carbon pricing. Reductions through efficiency are the preferred approach,along with an aggressive shift to renewable energy supply in markets that can support it through generation capacity, financial andcontractual structures. Where necessary, Novartis may purchase renewable attributes in order to comply with existing frameworksand emerging frameworks.

Previously, this had been done strictly using internal labor, and progress was updated in mid-year and then again at the end of theyear as initial fiscal data was prepared for the annual report. Novartis gathers data through September to draft reports released inJanuary, projecting data based on demonstrated trends in year and in previous years. This is known as a 9+3 approach. Once fullend of year data is available and has been validated, then the company will restate the data at the end of the first quarter. We nowleverage more detailed carbon footprint analysis through our commercial partner that executes the utilities procurement and activerisk management programs to allow for more real time updates. We can then adjust as needed both in consumption and in theplanned procurement of renewable attributes as needed to comply with this program. This should be the same strategy used as webecome subject to other compliance frameworks.

C11.2

(C11.2) Has your organization originated or purchased any project-based carbon credits within the reporting period?No

C11.3

(C11.3) Does your organization use an internal price on carbon?Yes

C11.3a

CDP Page of 6554

(C11.3a) Provide details of how your organization uses an internal price on carbon.

Objective for implementing an internal carbon priceStakeholder expectationsChange internal behaviorDrive energy efficiencyDrive low-carbon investmentStress test investmentsIdentify and seize low-carbon opportunities

GHG ScopeScope 1Scope 2

ApplicationPrice is applied to capital investments coming for review at the investment committees for the Real Estate and Facilities Servicesand for Novartis Technical Operations. These projects are then reviewed by the Executive Committee of Novartis, with the shadowprice of carbon added into the net present value calculations so the decision makers can understand the long term impact ofchoices related to carbon footprint.

Actual price(s) used (Currency /metric ton)100

Variance of price(s) usedStandard application of the USD 100 per ton (t) price is used to show impact on net present value when considering the increasingreal costs of carbon. Costs can accrue through developing carbon tax schemes, carbon pricing schemes and the financial impact ofclimate change on physical operations and distributed supply chains.

Type of internal carbon priceShadow price

Impact & implicationNovartis leadership has endorsed a carbon price of USD 100 per ton (t) of carbon dioxide equivalents, in line with revised estimatesof the real cost of carbon over the next decade. This is designed to match the time frame most traditionally aligned with return oninvestment and net present value calculations. Building a carbon price into investment decisions is important as it helps identifyprojects that will most cost-effectively reduce GHG emissions. This shadow price of carbon informed consideration and approval oflong term renewable power purchase agreements and efficiency investments being processed internally.

C12. Engagement

C12.1

(C12.1) Do you engage with your value chain on climate-related issues?Yes, our suppliersYes, other partners in the value chain

C12.1a

(C12.1a) Provide details of your climate-related supplier engagement strategy.

Type of engagementCompliance & onboarding

Details of engagementIncluded climate change in supplier selection / management mechanism

% of suppliers by number100

CDP Page of 6555

% total procurement spend (direct and indirect)100

% Scope 3 emissions as reported in C6.5

Rationale for the coverage of your engagementAs the data suggests that the category 1 “Purchased Goods and Services” and the category 4 “Upstream Transportation andDistribution” constitutes about 80% of our Scope 3 emissions for 2018, thus it is important to assess our suppliers on meetingenvironment sustainability right from the beginning.

Impact of engagement, including measures of successSupplier onboarding and compliance are enforced through various policies like Health, Safety and Environment (HSE) Policies,Novartis Third Party Code and Third Party Risk Management (TPRM) Programs. With our TPRM Program we identify newsuppliers who are posing an elevated risk. Novartis follows-up with these suppliers in the form of audits or on-site assessments.The audit criteria includes requirements for suppliers which is aligned with the Pharmaceutical Supply Chain Initiative (PSCI). Ourmeasures of success are performance indicators which tell us the percentage of suppliers we audit compared to the suppliers atrisk and the percentage of reduction in Scope 3 emission per revenue (million USD). Note: The details and figures are publiclyavailable in “Novartis in Society Report 2018”, attached in C10.1b.

CommentThe engagement is our first and second line of defence.

Type of engagementInformation collection (understanding supplier behavior)

Details of engagementCollect climate change and carbon information at least annually from suppliers

% of suppliers by number2

% total procurement spend (direct and indirect)10

% Scope 3 emissions as reported in C6.5

Rationale for the coverage of your engagementBoth the internal assessments as well as the external assessments by consultancies underpin that the procurement spend isdirectly proportional to the Scope 3 emissions. With the growing business, if not cost cutting on procurement spend, it was deemednecessary to understand and gauge the suppliers from environment sustainability point of view. For information collection, keysuppliers of raw materials such as chemicals, intermediates, active pharmaceutical ingredients, and packaging materials areconsidered. In addition, major logistics providers are part of the engagement. As Novartis has hundreds of thousands of suppliersin its global network ongoing engagement efforts target key suppliers having major influence on procurement spend. With thefrequent movement of suppliers in and out of our network, we may miss 100% engagement, but we are confident that we willaccomplish most of our required impact by focusing on key portions of the supply chain, and achieve our ambitious target on Scope3 emissions.

Impact of engagement, including measures of successIn-line with our annual process of capturing climate related data, Novartis continued to transparently measure the performance andefforts of our suppliers. This mode of engagement not only helps us to understand the awareness level among suppliers but alsohas been successful to identify collaboration opportunities. The measure of success is the response rate of suppliers for thisinitiative. With the deadline still open for responses, the response rate is currently at 70%. Novartis scores the suppliers based ontheir past, current and planned efforts towards reduction in GHG emissions, and derive insights from this data and shares theinformation back with supplier to complete the loop. Novartis conducts regular workshops and events for suppliers to enable itssupplier base with leading edge environmental solutions. One such area of improvement identified from information collection wasin the opportunity to tap into more renewable energy. Novartis is conducting a specific workshop, in collaboration with NGOs, onrenewable energy with leading industry renewable energy providers.

CommentThe data is used to complement the Scope 3 inventory. In addition, the data supports our efforts to measure the reduction of ourenvironmental footprint more accurately in the mid to long-term. The quality of all responses is assessed through comparison withindustry intensity emission values.

C12.1c

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(C12.1c) Give details of your climate-related engagement strategy with other partners in the value chain.

Novartis is a respected member of the Pharmaceutical Supply Chain Initiative (PSCI) - a group of pharmaceutical and healthcarecompanies sharing common vision of better social and environmental outcomes in the communities we serve. Novartis served as thechair of this group during 2018. Novartis supports its principles for responsible environment supply chain management and is takingresponsibility towards a better future collaboratively. With PSCI, Novartis is continuously engaged in conferences, webinars,workshops, peer learning and resource library to build capabilities among suppliers. Novartis currently chairs the PSCI.

One such instance of this collaboration was the three-day training workshop held in in Shanghai. It brought together senior HSEmanagers from various pharmaceutical companies to share knowledge and provide practical training to third-party audit firms on howto carry out health, safety and environmental (HSE) audits according to the PSCI Principles, which outline the industry expectationson safe and environmentally sound practices in their supply chain. 55 Health & Safety and Environment auditors had attended thisevent. The workshop included the use of case studies, group exercises, and question and answer sessions.

Other climate-related engagement efforts include collaboration with a renewable energy company, Invenergy, to add 100 megawattsof wind power to the electrical grid. The 12-year agreement is expected to reduce our greenhouse gas emissions by more than220,000 metric tons per year through the issuance of renewable energy attributes. Business processes are being created to allowaccess to renewable energy for our supply chain partners as part of our future power purchase agreements.

C12.3

(C12.3) Do you engage in activities that could either directly or indirectly influence public policy on climate-related issuesthrough any of the following?Direct engagement with policy makersTrade associationsFunding research organizationsOther

C12.3a

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(C12.3a) On what issues have you been engaging directly with policy makers?

Focus oflegislation

Corporateposition

Details of engagement Proposed legislative solution

Adaptationorresilience

Support Novartis worked with various organizations throughout 2017 to advancethe discussion on collaborative climate resilience. As a result of thatplanning, in partnership with the Cambridge Compact for a SustainableFuture, Novartis followed up in 2018 to create more Cambridge, MAcommunity engagement on a Novartis and MIT designed climateresilience table-top exercise hosted at Harvard University thathighlighted constraints in interdependent systems. This work informedthe creation of new working group efforts with the City of Cambridge,MA to align needs and address shortfalls in Cambridge, MA to buildresilience to sea level rise, flooding events and heat events.

New approaches to zoning and building codes, as well asupdated models for flooding that take future changes intoaccount as well as historical trends, must be put in place at city,state and municipal levels of government globally. Without strongsupport and guidance from elected leaders, communities willcontinue to build to the lowest acceptable standard, creatingsocio-economic crises and triggering climate justice challenges inthe decades to come.

Cleanenergygeneration

Support Novartis continued to be engaged with the World Business Council forSustainable Development (WBCSD) in drafting climate policy asks andthe Talanoa Dialogues that will be the basis for engagement betweenprivate sector and public sector leadership in an effort to removeregulatory barriers for mobilization of private capital for deeppenetration of renewables and energy storage n existing grids globally.In 2018, Novartis spoke on panels in partnership with WBCSD on theseissues at the Global Climate Action Summit and the Conference of theParties.

Revised nation state regulatory structures that allow use of powerpurchase agreements and other contractual and financialarrangements to increase renewables and storage technology iscritical to decarbonizing the grid, and potentially decarbonizingsegments of the transportation sector.

Cleanenergygeneration

Support We continue to increase our portion of purchasing carbon-free or non-fossil based renewable electricity as a measure to further reduce ourGHG emissions. Thereby, we give renewable based electricity a bettermarket acceptance and higher chance to penetrate the electricitymarket. Novartis spoke on panels in partnership with WBCSD on theseissues at the Global Climate Action Summit and the Conference of theParties. Novartis began planning in 2018 for a Pan-European PowerPurchase Agreement (PPA) as a follow up step in decarbonizing ourelectricity as part of our goal of carbon neutrality in own operations.

Renewables based electricity can only gain broader acceptance ifaccepted by consumers. Increased renewable portfolio standardswill allow us to more rapidly achieve our carbon reduction goals inbounded markets.

Energyefficiency

Support We have implemented a comprehensive energy management andenergy efficiency program, including energy audits, energy reportingand challenging energy use in capital projects. We have then used ourexperience to engage with peers in the pharmaceutical industry andother sectors to driver greater market pressure for delivery of newenergy efficiency technologies. Throughout 2018, Novartis conductedmultiple environmental sustainability site workshops to identify newopportunities for emissions reductions.

We consider energy efficiency and effective managementmeasures on energy efficiency as a feasible tool for decisionmaking and improvements. Legislative systems on energyefficiency and energy storage may additionally help to spreadsuch best practice

Carbon tax Support We have voluntarily set an internal carbon price of USD 100 per tonCO2e as a shadow price for more effective and better aligned decisionmaking on GHG emission reduction. We work with organizations suchas the WBCSD, UN-Global Compact, Ceres, C2ES and others tosupport spreading the concept of carbon pricing. This includes privatediscussions in drafting communication to legislators as well as morepublic engagements at WBCSD conferences. In 2018, Novartis spokeon panels in partnership with WBCSD on these issues at the GlobalClimate Action Summit and the Conference of the Parties.

We support the position of various advocacy organizations (e.g.the WBCSD) that allocating a true price to carbon will beeffective in mitigating climate change. We have set andimplemented our own shadow price on carbon of 100 USD perton CO2e, sufficiently high to represent the true cost of climatechange and to have a relevant influence on energy costs. A priceof carbon in national markets will also increase the adoption ofefficiency and renewables, scaling those assets in the localmarkets and making it more affordable to implement while alsoproviding benefit through lower carbon intensity in the grid.

Mandatorycarbonreporting

Support We participate and contribute to initiatives conducted by the WorldBusiness Council for Sustainable Development (WBCSD), GlobalReporting Initiative (GRI) and corporate sustainability reporting such asThe GHG Protocol, Natural Capital / True Value Reporting thatadvocate for mandatory reporting frameworks. In 2018, Novartis spokeon panels in partnership with WBCSD on these issues at the GlobalClimate Action Summit and the Conference of the Parties.

We consider standardized Corporate Reporting and carbonreporting an effective tool for disclosure to and engagement withstakeholders as well as internal decision making. If practical andin line with existing globally accepted approaches legislativesystems on mandatory corporate reporting could be additionallybeneficial to further increase the best practice corporate reportingto additional companies.

Cap andtrade

Support We report GHG emissions from 6 sites in the European Union as part ofthe EU-Emission Trading System (EU-ETS).We consider carbonemission trading an effective tool for supporting targets achievement ofemission reductions.

We support the development of the EU-ETS to make it moreeffective and more practical. We also support the spreading ofemission trading in other countries outside the EU.

Adaptationorresilience

Support We support Task Force on Climate-related Financial Disclosures as aprudent planning tool for companies to understand the risk and benefitposed to the company. We are partnered with MIT Joint Program indesigning, piloting and expanding a rigorous scientific approach toassessment and monetization of risk. In 2018, Novartis spoke onpanels in partnership with WBCSD on these issues at the GlobalClimate Action Summit and the Conference of the Parties.

In order to be truly effective, and to provide a level playing field,climate financial risk disclosure should be part of a regulatoryframework that provides clarity and equal footing to all reportingcompanies in assessing and disclosing materiality.

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C12.3b

(C12.3b) Are you on the board of any trade associations or do you provide funding beyond membership?Yes

C12.3c

(C12.3c) Enter the details of those trade associations that are likely to take a position on climate change legislation.

Trade associationCambridge Compact for a Sustainable Future. The City of Cambridge, MA, Harvard University, and Massachusetts Institute ofTechnology originally founded the Cambridge Compact for a Sustainable Future in 2013. They viewed the Compact as acommunity partnership and encouraged non-profits and businesses to join. Now, the Compact is at almost 20 members with thegoal to keep growing. Compact members want to make larger, more meaningful contributions to the challenges global climatechange presents. Every member signs the Compact and agrees to “work to create broader collaboration among themselves andwith other community partners in order to leverage the combined capacities in research, teaching, innovation, entrepreneurship,and program development” to “create a more healthy, liveable, and sustainable Cambridge, MA.”

Is your position on climate change consistent with theirs?Consistent

Please explain the trade association’s positionThe Compact supports strong regulatory pressures on climate mitigation to reduce greenhouse gas emissions, including carbontaxes and efficiencies.

How have you influenced, or are you attempting to influence their position?We are using our Board position to influence broader discussions about collaborative climate resilience achieved throughassessments of the vulnerability of interdependent systems of systems in Cambridge, MA. With greater knowledge, the city canthen put appropriate zoning and building codes in place to build resilience while investing in infrastructure resilience efforts.

Trade associationA Better City. A Better City is a diverse group of business leaders united around a common goal — to enhance Boston, MA and theregion’s economic health, competitiveness, vibrancy, sustainability and quality of life. With 130 member companies across multiplesectors, A Better City operates between the private and public sectors using technical expertise and research capabilities to shapekey policies, projects and initiatives. By amplifying the voice of the business community through collaboration and consensusacross a broad range of stakeholders, A Better City develops solutions and influences policy in three critical areas central to theBoston region’s economic competitiveness and growth — transportation and infrastructure, land use and development, andenvironment and energy.

Is your position on climate change consistent with theirs?Consistent

Please explain the trade association’s positionA Better City supports strong regulatory pressures on climate mitigation to reduce greenhouse gas emissions, to include carbontaxes and incentives for efficiency. They are focused on clean, effective transportation development that will spur economic growthin Boston, and also on infrastructure investment that can build resilience across market sectors. They are key participants inClimate Ready Boston in partnership with the City of Boston.

How have you influenced, or are you attempting to influence their position?We are using our Board position to influence broader discussions about collaborative climate resilience achieved throughassessments of the vulnerability of interdependent systems of systems in Boston. With greater knowledge, the city can then putappropriate zoning and building codes in place to build resilience while investing in infrastructure resilience efforts.

C12.3d

(C12.3d) Do you publicly disclose a list of all research organizations that you fund?No

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C12.3e

(C12.3e) Provide details of the other engagement activities that you undertake.

1) World Business Council for Sustainable Development (WBCSD): Novartis primary method of engagement is being an activemember of the WBCSD since its foundation in 1997, contributing to the work-streams of the WBCSD's focus areas and projects.Novartis actively contributes to work-streams on Power Purchase Agreements (PPAs), country deep dives for PPAs in India andChina, Climate Policy Working Group, Low Carbon Technologies Partnership Initiative (LCTPI), and Natural Climate Solutions(NCSs). Novartis experts provide case studies and example to strengthen WBCSD's work towards international negotiations onClimate Policy with feedback on proposals and own contributions. We have also participated in WBCSD events to share ourexperiences and help provide benchmarking data and practical advice to attendees at multiple WBCSD events in 2018. This dialoguecontinues to provide motivation as well as new strategies to move forward with our ambitious sustainability goals. We contributed tothe drafting of the Talanoa Dialogue which was used for private sector to engage state actors at the Conference of the Parties (COP).Novartis will continue to work with WBCSD to promote the use of PPAs and NCSs as a large portion of corporate portfolios forgreenhouse gas emissions reductions. In 2018, Novartis spoke on panels in partnership with WBCSD on these issues at the GlobalClimate Action Summit and the COP.

2) National Association of Environmental Managers (NAEM): Novartis is a member of the Board of Regents for NAEM and helpsshape the educational and advocacy agenda nationally for the group. We engage on environmental sustainability best practices toinclude Science Based Targets, carbon pricing, power purchase agreements, use of renewables and adoption of low/zero emissionvehicles. Novartis influences agendas by sitting on the Board of Regents, and participates as plenary speakers or panel speakers atregional and national level NAEM events to share our experience in Science Based Targets, adoption of renewables and experiencesin revisiting corporate environmental sustainability strategies. Novartis advocates for use of PPAs, deep penetration of renewables inregional grids, carbon pricing structures and a collaborative approach to developing climate resilience across interdependent systemsof systems.

3) Pharmaceutical Supply Chain Initiative (PSCI). Novartis attends meetings and participates in work stream efforts as a partner withleading pharmaceutical companies seeking to improve sustainability across all levels of the extended supply chain. Pharmacompanies engaged in benchmarking and coordination to share best practices across wide range of sustainability and Third PartyRisk Management issues. Novartis supports benchmarking with responses to questionnaires, participation in discussions, input tocase studies and sharing best practices. Development of go/no-go vendor selection criteria on a range of sustainability issues willallow for more consistent engagement with reputable firms that share our focus on values based behavior that supports thecommunities that we work in.

4) Novartis has continued to lead the local effort to explore ways to achieve a Net Zero laboratory environment, which may havesignificant benefit to Cambridge, MA given the large number of labs in the Cambridge area due to a high concentration of academicresearch labs and commercial industry labs in the city. Novartis also worked to create a series of panels, exercises and follow onworkflows to assess climate resilience vulnerabilities from a systems perspective. Novartis has hosted multiple meetings on campus,organized sessions to focus on design of Net Zero labs through adoption of technology and changes in behavior, and has spoken onpanels and in meetings to advocate for adoption of technology and behaviors to reduce consumption and increase climate resilienceacross Cambridge, MA. Additionally, Novartis helped organize a table-top exercise to assess climate resilience risks and addressthem in a proactive, collaborative fashion with industry and local government.

5) Novartis has funded the Massachusetts Institute of Technology (MIT) Clean Energy Prize three years in a row now, andMIT created a specific Novartis award for one of the Grand Finalists in 2018. Novartis has also provided a judge for the Grand Finalsin 2018, helping to identify promising startups that can transform clean tech industries.

6) Novartis provided sponsorship and funding for the Environmental League of Massachusetts (ELM) Earth Night 2018, and also

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provided sponsorship and funding for the 2018 A Better City Norman B. Levanthal Excellence in City Building Awards.

7) Novartis formally joined the Environmental League of Massachusetts (ELM) in late 2018, and are involved in lawmaker educationsessions with the Massachusetts state legislature on environmental sustainability issues to include climate mitigation and climateadaptation.

C12.3f

(C12.3f) What processes do you have in place to ensure that all of your direct and indirect activities that influence policy areconsistent with your overall climate change strategy?

At Novartis, our purpose is to reimagine medicine to improve and extend people’s lives. Through our business, we make an importantcontribution to society: we discover and develop innovative healthcare products, targeting unmet medical needs. We collaborate withothers to help address some of the world's greatest health challenges and focus our corporate responsibility work on two areas thatunderscore our mission: expanding access to healthcare and doing business responsibly. The Novartis Global Health and CorporateResponsibility Leadership Team (GHCRLT) comprised of leaders from each division and across multiple functions of the company,have guided this work. The GHCRLT is tasked with facilitating information-sharing between other CR-related governance bodies,such as the HSE Steering Committee, the Compliance Steering Committee and Corporate Affairs. For external advocacy, CorporateAffairs has developed a document describing eight advocacy principles as guidance for efforts regarding Corporate Responsibility(CR). The advocacy principles are based on and reflect the Novartis CR strategy, including doing business responsibly andaddressing our ambitious environmental sustainability targets to limit the company's environmental impact. Advocacy principles arerooted in the business strategy, and thus are consistent. Both, advocacy principles and business strategy, evolve over time in linewith the business and the external environment.

Additionally, active members and participants in the WBCSD activities are members of either top management or corporate functionalmanagers of the Company:

World Business Council for Sustainable Development (WBCSD): The CEO is a Council member and the Global Head HSE&BCM andthe Global Head of Environment are liaison delegates to the WBCSD. The Group Head Global Health & Corporate Responsibility andthe Global Head HSE&BCM participate in Council meetings representing the CEO when not available. The Global Head ofEnvironment, Head of Climate, and other experts in the global function participated in dedicated meetings and actively contribute toprojects and work-group activities. Novartis signed the manifesto for Energy Efficient Buildings of the WBCSD; we are applying ourGHG reporting to the GHG Protocol, developed by WBCSD and WRI, and we use the Global Water Tool for setting water efficiencytargets and tailoring our water efficiency program.

These efforts and engagements are coordinated and shared through the responsible corporate governance structure as previouslydescribed that is involved with Novartis’ environmental sustainability strategy, and is relayed into the strategy, risk, production,procurement and Health, Safety and Environment (HSE) communities as well as corporate responsibility and communications.

C12.4

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(C12.4) Have you published information about your organization’s response to climate change and GHG emissionsperformance for this reporting year in places other than in your CDP response? If so, please attach the publication(s).

PublicationIn mainstream reports

StatusComplete

Attach the documentnovartis-in-society-report-2018.pdf

Page/Section reference"Being a responsible citizen", pages 35 - 45

Content elementsStrategyEmissions figuresEmission targetsOther metrics

Comment

C14. Signoff

C-FI

(C-FI) Use this field to provide any additional information or context that you feel is relevant to your organization's response.Please note that this field is optional and is not scored.

C14.1

(C14.1) Provide details for the person that has signed off (approved) your CDP climate change response.

Job title Correspondingjob category

Row1

Head of Novartis Business Services (NBS), reporting directly to the CEO and ensuring that the Company has effective operational andfinancial procedures in place. Corresponding to job category COO.

Chief OperatingOfficer (COO)

SC. Supply chain module

SC0.0

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(SC0.0) If you would like to do so, please provide a separate introduction to this module.

Novartis is responding to the CDP Supply Chain Survey for the 8th time in 2018.

It should be noted that the carbon footprint data contained in this survey is calculated on the basis of products sold to the respectiveclient compared to the total Novartis sales for the year 2017. Novartis' manufacturing structures and materials supply chain is verycomplex. Product specific carbon and other environmental footprint data have been determined for a limited number of selectedproducts. The Greenhouse Gas (GHG) emission data reported in the course of this questionnaire is therefore calculated based onGHG intensity numbers for Novartis Businesses (Divisions) multiplied with the spend of the requesting client company with eachDivision.

SC0.1

(SC0.1) What is your company’s annual revenue for the stated reporting period?

Annual Revenue

Row 1 51900000000

SC0.2

(SC0.2) Do you have an ISIN for your company that you would be willing to share with CDP?Yes

SC0.2a

(SC0.2a) Please use the table below to share your ISIN.

ISIN country code (2 letters) ISIN numeric identifier and single check digit (10 numbers overall)

Row 1 CH 0012005267

SC1.1

(SC1.1) Allocate your emissions to your customers listed below according to the goods or services you have sold them inthis reporting period.

SC1.2

(SC1.2) Where published information has been used in completing SC1.1, please provide a reference(s).

SC1.3

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(SC1.3) What are the challenges in allocating emissions to different customers, and what would help you to overcome thesechallenges?

Allocationchallenges

Please explain what would help you overcome these challenges

Diversity ofproduct linesmakesaccuratelyaccounting foreachproduct/productline costineffective

Novartis' manufacturing structures are very complex, in the sense that a wide variety of individual products are manufactured at a number ofchemical, pharmaceutical, packaging and/or assembly facilities. Additionally, this is the case for our raw materials supply chain. Product-specificcarbon and other environmental footprint data have been determined based on Life Cycle Analysis (LCA) methodologies for a limited number ofselected products and on various environmental aspects (e.g., packaging material, volume). Due to the scale, diversity and complexity of Novartisproduct lines and customer pool, it is currently not feasible or practicable to allocate to individual customers. GHG data reported in the course ofthis questionnaire is therefore calculated based on GHG intensity numbers for Novartis Businesses (Divisions), multiplied with the spend of therequesting client company with each Division. This calculation is based on the methodology described by the WRI / WBCSD GHG ProtocolInitiative standard for Scope 3 Accounting and Reporting (corporate-level allocation, market value method).

Customer baseis too large anddiverse toaccuratelytrack emissionsto the customerlevel

Novartis produces a variety of different products and product versions to a large number of diverse customers worldwide and the portfolio sold tothese customers is complex. Therefore, the exact set of products sold to customers asking for input cannot be determined, and product-specificenvironmental footprint data has only been determined for a limited number of individual products. For these reasons, GHG data reported in thecourse of this questionnaire is calculated based on GHG intensity numbers for Novartis Businesses (Divisions), multiplied with the spend of therequesting client company with each Division. This calculation is based on the methodology described by the WRI / WBCSD GHG ProtocolInitiative standard for Scope 3 Accounting and Reporting (corporate-level allocation, market value method).

SC1.4

(SC1.4) Do you plan to develop your capabilities to allocate emissions to your customers in the future?No

SC1.4b

(SC1.4b) Explain why you do not plan to develop capabilities to allocate emissions to your customers.

Due to the scale, diversity and complexity of Novartis product lines and customer pool, it is currently not feasible or practicable toallocate to individual customers.

SC2.1

(SC2.1) Please propose any mutually beneficial climate-related projects you could collaborate on with specific CDP SupplyChain members.

SC2.2

(SC2.2) Have requests or initiatives by CDP Supply Chain members prompted your organization to take organizational-levelemissions reduction initiatives?Please select

SC3.1

(SC3.1) Do you want to enroll in the 2019-2020 CDP Action Exchange initiative?Please select

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SC3.2

(SC3.2) Is your company a participating supplier in CDP’s 2018-2019 Action Exchange initiative?Please select

SC4.1

(SC4.1) Are you providing product level data for your organization’s goods or services?Please select

Submit your response

In which language are you submitting your response?English

Please confirm how your response should be handled by CDP

Public or Non-Public Submission I am submitting to Are you ready to submit the additional Supply Chain Questions?

I am submitting my response Public InvestorsCustomers

Yes, submit Supply Chain Questions now

Please confirm belowI have read and accept the applicable Terms

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Documents

Novartis - Climate Change 2019€¦ · This strategy sets ambitious new climate change targets for our business. These are to use only renewable energy (scope 1 and 2) before the